The European Commission could fine Microsoft up to 10%
of its global annual sales for monopoly offences.
Microsoft is still committing the monopoly abuses it was first
accused of in 1998, the commission said in a preliminary ruling in
its long-running antitrust case against the company.
The commission has sent an updated statement of objections to
Microsoft, reiterating previous accusations that the software giant
has exploited its dominance in the market for computer operating
systems into the markets for server systems and media-player
software.
The latest statement also outlines the remedies the commission
wants to impose on Microsoft to ensure that competition in these
markets is freed up. It comes after extensive research was
conducted by the European competition regulator earlier this year
to strengthen its legal arguments.
"We now have a very strong case. The issue as it stands now is
too strong to ignore for the company at issue," said commission
spokesman Tilman Lüder.
Commissioner for competition issues Mario Monti said in a
statement that the commission is giving Microsoft "a last
opportunity to comment before the commission concludes the
case".
In addition to forcing changes in the way Microsoft does
business, a fine of up to a tenth of Microsoft's annual global
sales may be levied, but the size of the fine will not be decided
until the weeks before a final ruling.
Lüder said the final decision is "months rather than years away
now".
On 17 July Microsoft reported $32.19bn in revenue for its 2003
financial year, which ended on 30 June.
The fact that the commission believes the monopoly abuse is
still going on makes a large fine likely. Under European Union law
the gravity of an antitrust offence is determined partly by how
long it lasted. However, it has never fined a company the maximum
10% of sales.
Microsoft spokesman Jim Desler said his company is studying
the latest statement of objections, although he added
that Microsoft was not informed in advance that the commission
would issue a new statement.
The statement will prolong the case, according to Horatio
Guttierez, Microsoft's chief lawyer for Europe, Middle East and
Africa. Issuing a statement of objections now means "there is no
short-term culmination of the official process", he said, declining
to comment on details of the statement.
This is the third statement of objections from the commission;
the first two were in August 2000 and August 2001.
The commission wants Microsoft to reveal all the software code
that competitors would need to make their server systems as
compatible with Windows as Microsoft's own server software.
It has proposed two solutions: Either Microsoft must stop
selling its Media Player as a package with its Windows OS, or
Windows should be forced to carry a competing product as well.
"It's an extremely positive outcome," said Thomas Vinje, a
lawyer in the Brussels office of Morrison & Foerster, which
represents several Microsoft competitors. "It indicates that the
commission is serious about pursuing the company,"
However, Vinje expressed doubt about the must-carry solution for
media software.
"If Microsoft is allowed to keep bundling Media Player into
Windows with another rival product it will find ways of giving an
advantage to Media Player," he said, adding that it will be hard to
choose the rival that will benefit from having must-carry status on
Windows, and that it would be complicated to enforce the rule.
The commission's action to restore competition in the media
playing software may be too late.
"The game is up," said one content provider who asked not to be
named. "It's expensive to tailor content for different media
players. If we know that Microsoft's Media Player is in Windows
then there isn't much incentive to adapt our products for other
players."
The two best-known rivals to Media Player are RealNetworks' Real
Player and Quicktime, a system designed to run on Apple
computers.
The media player battle is far from over and the commission's
efforts demonstrate that, said Dave Stewart, deputy general counsel
for RealNetworks. The great majority of media companies use both
Microsoft's and RealNetworks' technologies today, he added.
"This game ain't up and if the game is kept legal, we know we'll
win," he said. "I think the commission's statement reflects that
this is a very important market. They would not be putting all
those resources into this if they thought competition was over in
digital media. We view this as the commission ensuring there will
be a level playing field in the future."
As one of Microsoft's main rivals, RealNetworks has provided
information to the commission when asked to do so, Stewart
said.
According to Richard Doherty, research director at The
Envisioneering Group, more than three-quarters of the world's PCs
today have Real or Apple or any other media player installed
besides Microsoft's player.
"RealNetworks and Apple have done fairly well despite the
home-team advantage Microsoft has with bundling Media Player.
Consumers have voted to download the RealPlayer and QuickTime
software to get the kind of content they want and the quality they
want," he said.
If a final ruling follows the latest position of the Commission,
Microsoft will have a chance to appeal at the European Court of
First Instance in Luxembourg, which hears disputes involving
commission rulings. Microsoft can also request that the
commission's remedy in the case be stayed - or put on hold -
pending an appeal.
Paul Meller and Joris Evers write for IDG News
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