Microsoft abandons EU antitrust case

Microsoft confirmed today that it will not appeal last month's landmark ruling by the European Court of First Instance. The software giant also agreed to changes to comply with the European Commission's decision of 2004.

The Commission said it considers that Microsoft is now complying with its obligations under that decision.

The European Commission ruled in 2004 that Microsoft had abused its dominant market position by leveraging its near monopoly in the market for PC operating systems onto the market for work group server operating systems.

Work group server operating systems are operating systems running on central network computers that provide services such as file and printer sharing, security and user identity management. Microsoft has a 95% market share on the desktop operating system market, and in excess of 70% on the market for work group server operating systems.

The Commission fined Microsoft €497 million and ordered the company to disclose on reasonable and non-discriminatory terms the information necessary to allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers.

Microsoft appealed that ruling to the Court of First Instance (CFI). In September, the Court upheld the Commission's findings on all significant points.

Microsoft issued a statement today: “At the time the Court of First Instance issued its judgment in September, Microsoft committed to taking any further steps necessary to achieve full compliance with the Commission’s decision. We have undertaken a constructive discussion with the Commission and have now agreed on those additional steps."

"We will not appeal the CFI’s decision to the European Court of Justice and will continue to work closely with the Commission and the industry to ensure a flourishing and competitive environment for information technology in Europe and around the world,” said the statement.

According to a Commission statement, Microsoft has today agreed to three substantial changes to bring the company into compliance with the 2004 decision.

The Commission said: "First, ‘open source’ software developers will be able to access and use the interoperability information. Second, the royalties payable for this information will be reduced to a nominal one-off payment of €10,000. Third, the royalties for a worldwide licence including patents will be reduced from 5.95% to 0.4% – less than 7% of the royalty originally claimed."

In these agreements between third party developers and Microsoft, Microsoft will guarantee the completeness and accuracy of the information provided, according to the Commission. The agreements will be enforceable before the High Court in London, and will provide for remedies, including damages, for third party developers in the event that Microsoft breaches those agreements. Effective private enforcement will therefore complement the Commission's public enforcement powers, it said.

"These changes mean that open source competitors to Microsoft will be able to provide businesses with competitive, innovative alternatives to Microsoft work group server products, knowing that they are fully interoperable with Microsoft's Windows desktop operating system," said the Commission. "

The Commission will now adopt a decision "as soon as possible" on the pending non-compliance case regarding past unreasonable pricing for the interoperability information.

Microsoft also has ongoing obligations to continue to comply with the Commission's 2004 Decision. Should Microsoft fail to comply with those obligations in the future the Commission can issue a new decision to impose daily penalties.

Competition Commissioner Neelie Kroes said: “I welcome that Microsoft has finally undertaken concrete steps to ensure full compliance with the 2004 Decision. It is regrettable that Microsoft has only complied after a considerable delay, two court decisions, and the imposition of daily penalty payments. However, the measures that the Commission has insisted upon will benefit computer users by bringing competition and innovation back to the server market."

Kroes said that the Commission will remain vigilant to ensure that Microsoft continues to respect its compliance obligations and does not engage in other anti-competitive behaviour.

"I have always said that open source software developers must be able to take advantage of this remedy: now they can," she said.

Angelo Basu, a competition law specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said Microsoft's capitulation will remove the uncertainty that would have lingered had Microsoft appealed to the European Court of Justice.

"Pending the appeal to the CFI, Microsoft took a tough line and sought to extract terms for interoperability information at a much higher rate than was acceptable to the Commission or competitors and it might have been expected to carry on doing so pending a further appeal which could itself have taken many years to come to a final ruling," he said. "Now it appears that there will be clear terms on which Microsoft will license its information so that businesses can go back to developing and selling software rather than fighting with Microsoft."

Basu said that it is possible that Microsoft's decision will also send a signal to other IT businesses in dominant positions.

"The settlement will have given the Commission renewed confidence that it could take effective action against others who were reluctant to share interoperability information or who put a high price on it," he said.