The European Union's Court of First Instance has rejected Microsoft's appeal of the European Commission's 2004 landmark antitrust decision against the company, which concluded that the software giant had abused its dominant position in the computer industry "by leveraging its near monopoly in the market for PC operating systems."
The Court of First Instance ruled "that the Commission did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine" at 497 million euros (US$689.4 million). The Court also concluded that Microsoft had failed to show that the EC's antitrust decision would have a significant negative effect on the software giant's incentives to innovate.
In affirming the EC's 2004 antitrust decision, the Court of First Instance is allowing to stand "an important precedent in terms of firmly establishing the obligations of dominant companies to allow competition, in particular in high tech industries," said EC competition commissioner Neelie Kroes.
The remark suggests heavy seas ahead for Intel and Qualcomm, which are currently the targets of ongoing EC investigations.
Ensuring Swift Compliance
The Court's ruling is particularly important given that 95 percent of the world's PCs run Windows, Kroes said, noting that a considerable amount of work remains to be done to ensure that rivals have a level playing field when competing with Microsoft.
In particular, Kroes said that indispensable interoperability information on Microsoft's software for servers still needs to be made available to competitors on reasonable and nondiscriminatory terms.
Since the EC first began its investigation of Microsoft, the software giant's market share for work group servers has doubled to 80 percent, Kroes explained. She said that competitors need to be able to build workgroup server products that not only work properly but also can compete with Microsoft products on an equal footing.
"Microsoft must now comply fully with its legal obligations, and desist from engaging in anticompetitive conduct," Kroes sated. "The Commission will do its utmost to ensure that Microsoft complies swiftly."
Sun Micro Agreement Ironic
The Court of First Instance did rule that the Commission had exceeded its powers by making Microsoft foot the bill for the EC-appointed trustee for monitoring the software giant's compliance with the antitrust decision. But Microsoft said this was a minor point of victory considering the broader issues before the Court.
Microsoft senior vice president and general council Brad Smith said he found it "a bit ironic" that Microsoft had just signed a new interoperability agreement with Sun Microsystems -- the company responsible for first bringing Microsoft's activities to the attention of the European Commission in 1998.
"A lot has changed since then. The world has changed, this industry has changed, and this company has changed," Smith told press conference attendees. "It is important to us as a company that we comply with our obligations under European law. We'll study this decision carefully and if there are any additional steps that we need to take in order to comply with it, we will take them."
Despite the conciliatory tone of his remarks, Smith refused to rule out an appeal. He said Microsoft would need to consider the Court's written ruling before arriving at any final decision.
According to the Court of First Instance, Microsoft has two months to file an appeal before the Court of Justice of the European Communities. However, the Court noted that any appeal by Microsoft would be "limited to points of law only."