The European Court of First Instance (CFI) has recently handed down
its Order1 on Microsoft's request
for interim measures to suspend the effects of the Commission's decision, which
it had already appealed.
The Commission's Decision
The Commission's decision was adopted on 24 March 2004, following an
exhaustive and wide-ranging investigation for infringement of the EC Treaty's
competition rules that lasted over five years, after it considered that
Microsoft had abused its dominant position in the field of PC operating
systems.
In the Commission's opinion, Microsoft had committed two acts that
abused its dominant position and that are prohibited by Article 82 of the EC
Treaty. These acts are: (i) refusing to provide the necessary information on
interoperability between PC Windows and its competitors' work group server
operating products, and (ii) tying Windows Media Player, a product with
competitors, to its omnipresent Windows operating system.
i. Refusing to provide information permitting
interoperability
This file was opened in 1998 with the case brought by US Company
Sun Microsystems, according to whom Microsoft had refused to provide
information on interfaces that it needed to develop products able to "dialogue"
correctly with Windows and, in this way, to compete under equal conditions in
the market for work group server operating products.
The Commission found that Sun wasn't the only company to have been
refused the information and that Microsoft's refusal to divulge this
information formed part of a wider strategy conceived to expel competitors from
the market.
According to the Commission, a large number of clients indicated
that Microsoft's refusal to divulge information on the interfaces artificially
altered their consumer choice in favour of Microsoft server products. The
responses to the studies presented by Microsoft confirmed the link between the
interoperability advantage that Microsoft kept for itself and its increasing
market share.
ii. Tying
In the official investigation into this conduct, the Commission
reached the conclusion that the immediate omnipresence enjoyed by Windows Media
Player as a result of being tied to the Windows PC operating system
artificially reduced the incentives for companies with music, cinema or
multimedia content, as well as software developers and content providers, to
develop competitive offers of multimedia players.
Consequently, the act of tying Microsoft's multimedia player
closed the market to competitors, thereby reducing consumer choice because the
competitors' products suffered a disadvantage unrelated to their price or
quality.
In its decision, the Commission imposed a 497,196,304€
economic sanction on Microsoft for abusive practices committed over five and a
half years and, in addition, two remedies for anti-competitive effects,
consisting of:
- the obligation to divulge complete and precise documentation
on the interfaces (but not the source code) within a 120 day deadline to enable
competitors' work group server operating products to guarantee total
interoperability with PC and Windows servers, with the objective of enabling
them to develop products capable of competing under fair conditions on the work
group server operating products market. This would be in exchange for
reasonable remuneration for information protected by intellectual property
rights; and
- the obligation to offer PC manufacturers a version of their
PC client operating system without Windows Media Player within a 90 day
deadline.
Order of the Court of First Instance
The CFI refused the interim measures requested by Microsoft on the
grounds that the necessary requirements for suspension of the remedies in the
Commission's decision were not met. These requirements are a prima facie case
and urgency.
i. Refusal to provide information
Regarding the refusal to provide information, the Court considered
that a prima facie case did exist since Microsoft claimed that the information
the Commission wanted it to divulge was protected by intellectual property
rights (patents and trade secrets). The Court did not resolve the question of
whether these rights prevail over the aim of maintaining competition in the
market, as it considered that this should be discussed when the substance of
the case is analysed and not at a sitting on interim measures.
However, the Court did not consider that it had been proven that
serious and irreparable harm would result from divulging the information
necessary for interoperability. Firstly, because this would not imply any costs
for Microsoft, who would receive the corresponding royalties for licences
granted to the protocols. Additionally, protective clauses could be included in
the contract as necessary, to maintain the confidentiality of the information
requested.
Moreover, no irreparable harm will be caused if the Commission's
decision is ultimately annulled and competitor products incorporating
Microsoft's information remain in the market because these products would
become rapidly obsolete. In the CFI's opinion, there isn't any risk of the
Microsoft products being copied because the information to be provided is for
interoperability purposes only and its use would not be permitted for any other
purpose.
The Court did not accept Microsoft's claim regarding the effect of
the decision on it's freedom to conduct a business, as it considered that this
did not represent a change in Microsoft's business strategy, in which a
tendency to grant licences for information on operability could already be
noted. Finally, the CFI didn't consider that the existence of obstacles for
Microsoft to recoup its lost market quota, in the event that the decision is
ultimately annulled, was proven.
ii. Tying
As with the refusal to provide information, the Court understood
that the arguments presented by Microsoft represent a prima facie case and it
indicated that they should be analysed together with the substance of the case,
since they involve complex economic arguments.
Nonetheless, the requirement of urgency was not met and for this
reason, suspension of the remedies imposed by the Commission was refused. The
claimed interference of this measure with Microsoft's freedom to conduct a
business, although it could represent serious harm, was not irreparable in the
Court's opinion. Nor did it consider that the possible reduction in demand for
Windows that Microsoft claimed would occur if it did not incorporate the
Windows Media Player would be serious or irreparable. Furthermore, nothing
would prevent it from selling the Windows Media Player together with the
Windows operating system if the Commission's decision is ultimately annulled.
Microsoft had not demonstrated that it would be unable to recover the market
share that it could loose if it stopped selling the package.
Finally, the CFI did not accept the argument that Microsoft's
reputation would be harmed by possible malfunctions following the separation of
the Windows Media Player, as this was not adequately demonstrated. It also did
not accept that Microsoft's trade marks would be harmed as it had not
demonstrated the public's perception of the latter nor any possible
infringements of the intellectual property rights.
The CFI's Order can be appealed before the European Court of
Justice, in a second attempt to achieve suspension of the Commission's
decision. Nonetheless, at the date of publication, no announcement has been
made that Microsoft has presented an appeal against the CFI's decision.
1.
Order of 22 December 2004, case T-201/04 R.(«)
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