EU orders Microsoft to share tech and pay €497.2m fine

24 Mar 2004

Following a five-year investigation, the European Commission this afternoon has ordered software giant Microsoft to pay a €497.2m for abusing its market power in the EU. As well as this the Commission has ordered Microsoft to disclose to its competitors the interfaces required to “talk” with the Windows operating system within 120 days and offer a version of Windows without its MediaPlayer software to manufacturers and end users within 90 days.

This afternoon the Commission unveiled its judgment that Microsoft Corporation has violated the EU Treaty’s Competition rules by abusing its near monopoly of the PC operating system market.

It said that Microsoft abused its market power by deliberately restricting interoperability between Windows PCs and non-Microsoft work group servers, and by tying its Windows Media Player product in with its Windows operating system to compete in a market where it faced competition.

“Dominant companies have a special responsibility to ensure that the way they do business doesn’t prevent competition on the merits and does not harm consumers and innovation,” said European Competition Commissioner Mario Monti.

“Today’s 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,” he added.

In a statement, the Commission argued that this illegal conduct has enabled Microsoft to acquire a dominant position in the market for work group server operating systems, which are at the heart of corporate IT networks, and risks eliminating competition altogether in that market. In addition, Microsoft’s conduct has significantly weakened competition on the media player market.

It stated: “The ongoing abuses act as a brake on innovation and harm the competitive process and consumers, who ultimately end up with less choice and facing higher prices. For these very serious abuses, which have been ongoing for five and a half years, the Commission has imposed a fine of € 497.2m.”

In the remedies recommended by the European Commission Microsoft is required within 120 days to disclose complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers. This, it says, will enable rival vendors to develop products that can compete on a level playing field in the work group server operating system market. The disclosed information will have to be updated each time Microsoft brings to the market new versions of its relevant products.

Microsoft is also required within 90 days to offer to PC manufacturers a version of its Windows client PC operating system without Windows Media Player. The un-tying remedy does not mean that consumers will obtain PCs and operating systems without media players. Most consumers purchase a PC from a PC manufacturer, which has already put together on their behalf a bundle of an operating system and a media player. As a result of the Commission’s remedy, the configuration of such bundles will reflect what consumers want, and not what Microsoft imposes, it says.

Microsoft retains the right to offer a version of its Windows client PC operating system product with Windows Media Player. However, Microsoft must refrain from using any commercial, technological or contractual terms that would have the effect of rendering the unbundled version of Windows less attractive or performing. In particular, it must not give PC manufacturers a discount conditional on their buying Windows together with WMP.

“The Commission believes the remedies will bring the antitrust violations to an end, that they are proportionate, and that they establish clear principles for the future conduct of the company,” it stated.

To ensure Microsoft complies with the ruling, the Commission will appoint a “monitoring trustee” that will ensure that Microsoft’s interface disclosures are complete and accurate and that two versions of Windows are equivalent in terms of performance.

By John Kennedy