Europeans Impose Record Fine on Microsoft for Anti-Competitive Practices

On March 24, 2004, the European Commission (EC) concluded a five-year investigation of Microsoft by imposing a fine of €497.2 million (over US$600 million) for anti-competitive practices in relation to its server and digital media player software in the European Union (EU). The EC found that Microsoft deliberately abused its market power by restricting interoperability between Windows-based PCs and non-Microsoft work group servers, and by tying its Windows Media Player (WMP) with its Windows operating system (OS). In the relevant markets, the EC's conclusion was that Microsoft had been able to acquire a dominant position and had created the risk of an elimination of competition. Accordingly, Microsoft's ongoing abuses resulted in a brake on innovation and harm to the competitive process, confronting consumers with less choice and higher prices. The EC ordered Microsoft to remedy the situation by taking the following steps: Since the European market accounts for 30% of Microsoft's business, the EC's decision is a significant one. In reaction, Microsoft stated its intention to appeal the decision to the European Court of First Instance (from which a further appeal to the European Court of Justice may be available). Microsoft will probably request that the EC's order requiring the production of a non-WMP version of Windows be suspended and it seems quite likely that there will be another three to five years of litigation before all aspects of the ruling are resolved. Such response and counter-response would, in part, reflect an innovative feature of the EC's regulatory strategy as expressed in the ruling – namely, its attempt to influence Microsoft's current behaviour in the marketplace, as opposed to merely punishing it for past infractions. In the US Congress, 10 members of the House International Relations Committee sent a letter to Marlo Monti, the EU anti-trust chief, asserting that federal litigation in the US had resolved all outstanding anti-trust problems and indicating that it was of the "utmost importance" for the US to continue to take the lead role in overseeing the business practices of US companies. Based on past experience, if the litigation takes three to five years to run its course, the financial impact of an eventual settlement will be diluted by the passage of time, and further innovations within the industry may overtake many of the functional aspects of the EC remedial orders. For more information, see: http://www.nytimes.com/2004/03/19/technology/19SOFT.html?th; http://www.siliconvalley.com/mld/siliconvalley/news/editorial/8255713.htm; http://makeashorterlink.com/?V2CD224D7; http://news.com.com/2100-7343_3-5178281.html; http://makeashorterlink.com/?T605255D7; http://makeashorterlink.com/?F615255D7; http://www.wired.com/news/business/0,1367,62789,00.html; http://news.com.com/2100-1012_3-5178914.html; or http://www.siliconvalley.com/mld/siliconvalley/news/editorial/8267395.htm. Summary by: Colin Adams