Would MS dance to EU tunes?

David Lawsky

BRUSSELS: The EU Commission moved closer to a landmark European antitrust decision against Microsoft when member states backed its plan to force the software giant to change the way it sells its audio-visual software as part of Windows. Microsoft also faces the prospect of a fine expected to run into hundreds of millions of euros as part of the European Commission's sanctions against the company. Microsoft is certain to appeal any EU decision it does not like.

"I've just been informed that the meeting is over and that the member states have unanimously backed the Commission's draft decision," Amelia Torres, the Commission's competition spokeswoman, told reporters. She was referring to a meeting of competition experts from the 15 EU states, which approved the Commission's draft decision to require Microsoft to share proprietary information with rival server makers. The panel is an advisory body, which usually follows the Commission's recommendations.

The draft also requires the company to provide computer manufacturers with a second version of Windows stripped of built-in audiovisual software, persons close to the case said. As the clock ticked toward a final Commission decision on March 24, a Microsoft spokesman said settlement was still a possibility. "We continue to work actively with the Commission towards a settlement," he said after the EU panel meeting. A competition expert saw a compromise as being tough.

"The Commission's already got the opinion of the member states that these are the right remedies. To substitute different remedies now would be very difficult," said David Wood, a competition lawyer with Howrey Simon in Brussels. The EU advisory committee will meet again on March 22 to decide whether to endorse the proposed fine, with the Commission's final ruling coming two days later.

The draft favoured by the 15 member states gives Microsoft a deadline to get its house in order or face additional action, the sources said. The Commission has fine-tuned its draft ruling to stand up to scrutiny by EU courts in Luxembourg. Microsoft acknowledges that Windows, which runs on nearly all personal computers, is dominant. The Commission draft says the company abused that dominance in two areas, sources say.

HURTING MICROSOFT RIVALS

First, Microsoft tried to hurt rival makers of audiovisual software by bundling its Windows Media Player with Windows. The draft requires Microsoft ship two versions of Windows to computer makers, which account for most sales of the operating system, for installation in computers sold in Europe.

One version would have Microsoft Windows Media Player tied in as it is now, the other would have it stripped out. The aim is to free computer makers to sell Windows bundled with rival audiovisual software such as RealNetworks RealPlayer or Apple Quicktime, the sources say. Microsoft says Windows Media Player is built in and removing it would damage the operating system. RealNetworks has used demonstrations at an EU hearing to argue it can be removed.

Second, the draft says Microsoft has given rival makers of low-level servers too little information to compete. As a result, Microsoft's low-level servers, performing tasks such as printing and file handling, work better with Windows. The draft decision says the U.S. firm must share more of its protocols with rivals, charging a reasonable royalty. It will be left to Microsoft to work out the precise solution, with close oversight by the Commission, the sources said.

Unlike the United States system, where a judge makes the initial decision, in Europe the Commission hands down a ruling and courts provide an avenue for appeal. The company's first move would be to ask a court to suspend the Commission ruling until the case is completed, which could take three to four years and be subject to further appeal.

The EU Court of First Instance has the option of granting a suspension, denying it, or asking the parties' consent to put the case on a one-year fast track and, if both sides agree, freeze remedies in the meantime.

© Reuters