What Does the EU Victory Over Microsoft Mean?

In a ruling that's expected to have far-reaching implications, the European Union (EU) Court of First Instance upheld European Commission claims that Microsoft abused their dominant position in the operating system (OS) market, siding with regulators in an antitrust case. The law suit began in early 2004. (Source: CNET News)

"The court ruling is welcome for its confirmation of the Commission's decision and its underlying policy, but nevertheless, it is bittersweet, because the court has confirmed the Commission's view that consumers are suffering at the hands of Microsoft" said Neelie Kroes, the Commission's Competition Commissioner during a press conference.

She added that if Microsoft does comply with the ruling, she expects to see a significant drop in Microsoft's overwhelming market share.

The ruling by the court required Microsoft to share certain technological specifications or protocols with rivals so competitors could make their products work with the Microsoft OS. It also required Microsoft to offer unbundled options to consumers when tying two separate products together, such as Windows and Microsoft's Media Player software. It also upheld a $613 million fine imposed by the Commission.

Microsoft hasn't decided whether or not to appeal the ruling yet. "The decision is not what we had hoped for and to say anything less would be less than candid," said Brad Smith, Microsoft general counsel during a press conference. Smith acknowledged that the court sided with the Commission on key points, but Microsoft found some solace in the fact that the court annulled the Commission's imposition of having an independent trustee monitor compliance. He added that Microsoft has made some progress on the interoperability issues, but that more work needs to be done.

Windows Vista and the EU Ruling

The antitrust law suit was brought about during the time when Windows XP was becoming the dominant OS. Now that Vista has been released, how will the ruling affect it?

Recently, Microsoft has had to face complaints about the way Vista handles search, antivirus security and certain document formats among other things. Neelie Kroes, the Commission's Competition Commissioner told Microsoft in 2006 that she was worried about features in Vista limiting customers' choices and competitors' ability to develop programs that would run smoothly in Vista. (Source: The Associated Press)

Before Microsoft released Vista to businesses in November 2006, the company said it had made changes that solved EU and competitor concerns. The EU didn't give Microsoft the go ahead, saying Microsoft should know how to comply with antitrust law. The EU hasn't re-examined Vista yet, nor has it given Microsoft the all-clear.

Analysts differ on how the ruling will affect Windows Vista

"Directions on Microsoft" analyst Matt Rosoff said Vista clearly reflects the European Commission's antitrust verdict against Microsoft three years ago. "Without the 2004 decision having been in place, they might have been more aggressive about bundling features, like Web search. I think they've been pretty careful about what they're putting into Vista" Rosoff said.

But Gartner Research Inc. analyst Michael Silver said that Vista isn't out of danger yet. "Microsoft did a number of things to pre-emptively repair things in Vista that they thought might come up, but the EU could demand certain things that are beyond what Microsoft would willingly do" Silver said. One example could be for regulators to tell Microsoft to hand over proprietary Vista technology to competitors he said.

Elsewhere, some of Microsoft's rivals said they will continue to hammer on antitrust issues, not only with Vista, but in other business areas too.

Thomas Vinje, an attorney for the European Committee for Interoperable Systems (ECIS) said that last years changes to Vista were "low-hanging fruit." Some things that still trouble ECIS relate to Vista, but many others simply relate to the way Microsoft's desktop programs tie into Microsoft's server products, as well as Microsoft's actions in the rich Web application development area.

In the U.S., several states are asking the Justice Department to extend oversight of Microsoft's business practices as part of a 2001 antitrust settlement with federal and state governments, to give more time to examine Vista.

Kroes will discuss the Microsoft ruling with U.S. authorities when she visits New York later this month. "Let me be clear -- there is one company that will have to change its illegal behavior as a result of this ruling: Microsoft," she said.

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