| Author (Person) | Davies, Eric | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Publisher | ProQuest Information and Learning | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Title | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Series Details | 5.4.04 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Publication Date | 05/04/2004 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Content Type | News, Overview, Topic Guide | In Focus | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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On 24 March 2003, the European Commission announced that a five-year investigation into Microsoft had finally concluded that the corporation was guilty of breaching EU competition law. Microsoft's 'Windows' operating system is found on over 95% of personal computers. In the Commission's view, Microsoft has used that domination to move into the markets for work group server operating systems and media players. Responding to this abuse of its market power, the Commission has fined the company €497 million. It has also given the company 90 days in which to offer computer manufacturers and consumers a version of Windows which does not include Windows Media Player. Furthermore, the Commission has also told Microsoft that it has 120 days in which to give its competitors the information they require to enable their products to communicate with Windows (the so-called 'interfaces'). The Commissioner responsible for competition policy, Mario Monti, said that the decision 'restores the conditions for fair competition in the markets concerned and establish clear principles for the future conduct of a company with such a strong dominant position'. The decision was welcomed by other manufacturers, but was said by Microsoft to be against the interests of consumers. Background It was far from certain that the Commission would take such action against Microsoft. Negotiations had continued right up until the announcement was made. The consensus was that Microsoft was not concerned by the prospect of a fine, but was desperate to avoid the other types of sanctions finally imposed on it by the Commission. With attention focusing on the anticompetitive 'tying' of the company's Windows Media Player to the Windows operating system, Microsoft had tried to ward off more severe sanctions by offering to distribute millions of media players from other manufacturers (see Financial Times: In addition to Microsoft's desire to settle, it was also thought that Commissioner Monti's experience of having a number of important decisions reversed in the courts might have made him more anxious to seek a deal rather than expose himself to further legal action which he might not win (brief details of the decisions and their impact on the Competition DG were given by the Financial Times in The Financial Times had argued some months before the decision that it 'would be wrong to back down for fear of another judicial embarrassment (see: Although Microsoft is an American company, the fact that it sells its products within the European Union requires it to comply with EU competition law, which the Commission is responsible for applying within the European Economic Area (the EU Member States, plus Iceland, Liechtenstein and Norway). The Commission cooperates with other competition authorities, both within the EU and elsewhere. In the case of Microsoft, Commissioner Monti was said to have kept in close contact with the US Department of Justice. Indeed, his decision to act against Microsoft might in part have been influenced by the Department's recent observation that Microsoft had apparently failed to meet the demands of an agreement reached to end legal action taken against the company in the United States (see Financial Times: Another factor said to be uppermost in the Commissioner's mind was the forthcoming launch of Microsoft's operating system, codenamed 'Longhorn'. Due in 2006, Longhorn is expected to continue Microsoft's strategy of making its operating systems ever more complex, thereby making it more and more difficult for competitors to develop compatible products. Longhorn seems bound to make life even more difficult for the company's rivals, preventing them from competing on the basis of price, quality or innovation by forcing them to make compatibility a key issue. From Microsoft's side, the growing complexity is said to be a question simply of making its products more effective and of offering users a better experience. However, critics point to the detrimental impact on Netscape of Microsoft bundling its Internet Explorer browser with new computers, and to a similar situation with RealPlayer, which has struggled to compete with Microsoft's bundled Windows Media Player. Google is now thought to be in the firing line, as Microsoft prepares to include a new search engine within Windows. (See Financial Times: The combination of Microsoft's market dominance and strategy of 'tying in' products acts, in the view of the Commission as 'a brake on innovation' which harms 'the competitive process and consumers, who ultimately end up with less choice and facing higher prices.' The Microsoft case has its roots in a complaint made in 1998 by Sun Microsystems, which caused the Commission to open an investigation which found that Microsoft was refusing to provide other companies with interface information, thereby effectively shutting them out of the market (see: Commission concludes on Microsoft investigation, imposes conduct remedies and a fine). The Commission later broadened its investigation, by looking at how Microsoft's decision to tie the Windows Media Player with Windows 2000 operating system had affected the media players market, and found that the strategy reduced competition from 'music, film and other media companies, as well software developers and content providers'. Responses to the Commission's decision The Financial Times noted that 'American companies are getting used to the fact that the European Union's competition authorities can prove tougher to convince than regulators and courts in the US' (see: Despite not having seen the final decision text, Novell's view was that 'the Commission's findings, decision and remedies will improve competition, stimulate innovation and benefit consumers of information technology services and solutions' (see: Novell Statement On EC Microsoft Decision). RealNetworks' response was that the decision 'has formally declared that Microsoft's media player bundling strategy is illegal and has established the guideposts for future bundling cases' (see: RealNetworks Statement Regarding European Commission Ruling Against Microsoft). Sun Microsystems applauded the decision, saying it was 'an important precedent for defining the principles of open competition not just for today, but for the future of a vibrant and vital worldwide IT industry. We look forward to participating in an exciting period of innovation that will deliver the tangible consumer benefits that derive from competition on the merits' (see: Sun Microsystems, Inc., Applauds EC Decision). The Computer & Communications Industry Association believes that 'innovation and consumer welfare are driven by competition, both of which have withered under Microsoft dominance in the five years this case has been pending' and that the Commission's decision 'is vital not just to Europe, but to the entire world as competition in Europe effects innovation in the United States and elsewhere' (see: Statement by CCIA President Ed Black on European Microsoft Antitrust Action). The US Department of Justice statement on the EC's decision in its Microsoft investigation expressed concern, arguing that 'U.S. experience tells us that the best antitrust remedies eliminate impediments to the healthy functioning of competitive markets without hindering successful competitors or imposing burdens on third parties, which may result from the EC's remedy'. The decision was not welcomed by the pro-Microsoft Association for Competitive Technology, which said that 'the only winners are multi-billion dollar Microsoft competitors, Real Networks and Sun Microsystems, who engineered this case from the beginning. Instead of protecting consumers this ruling serves only to protect competitors from competition. The message from today's decision is forget innovating, start litigating and if you fail in America, try Europe' (see: European Sanctions On Microsoft Harm Innovation and Consumers). Not surprisingly, Microsoft had a lot to say about the Commission's decision, including: 'This is a case that started in the United States. Microsoft is an American company. The complainant companies are American companies. The software is designed in the United States, and the U.S. government dealt with the issues thoroughly. There was no need for the commission to disrupt that regime with this conflicting approach in which it's embarked today' (see: News Teleconference with U.S.-based Journalists Regarding European Commission Decision). Microsoft's Chief Executive Officer, Steve Ballmer, said that the company respects 'the Commission's authority, but we believe that our settlement offer ... would have offered far more choices and benefits to consumers (see: Microsoft Says Proposed Settlement Would Have Been Better For European Consumers). Microsoft also argued that 'in effect what the Commission is doing is not only freezing the operating system where it exists today, but it's taking the consumer experience backwards by breaking important features that meet the critical needs of a number of important groups of consumers' (see: News Teleconference with European-based Journalists Regarding European Commission Decision). Microsoft will appeal the Commission's decision. As the BBC pointed out, if the company can persuade the Court of First Instance to suspend the Commission's proposed remedies during the appeal process, 'the computer giant can then appeal at its leisure while its rivals remain excluded from getting their software onto its systems' (see: Q&A: Europe v Microsoft). Further information within European Sources Online European Sources Online: Topic Guides
European Sources Online: European Voice
European Sources Online: Financial Times
Further information can be seen in these external links: EU Institutions European Commission DG Press and Communication
DG Competition
Industry sources Association for Competitive Technology Computer & Communications Industry Association
Microsoft Novell
RealNetworks
Sun Microsystems
National governments United States Department of Justice Media organisations BBC News Online
Eric Davies Background and reporting on the week's main stories in the European Union and the wider Europe. |
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