Microsoft Ends Resistance to EU Antitrust Ruling

Microsoft will not appeal the 2004 ruling against it by European antitrust regulators any further and has reached an agreement to bring it into compliance with all aspects of the ruling’s wide-ranging penalties.

Microsoft had the option of appealing a ruling made in September by the Court of First Instance (CFI), which upheld the original antitrust ruling of regulators, including the demand that Microsoft offer rival server makers an affordable way to access Windows communications protocols.

European Commissioner for Competition Neelie Kroes announced that the case had been brought to conclusion at a news conference in Brussels early Monday, calling the resolution a victory for consumers on the continent, one with repercussions to be felt for some time.

Additional Steps

The 2004 ruling came with a record fine of some 497 million euros (US$703 million), one augmented two years later with another 280 million euros ($396 million) penalty for noncompliance.

The EU’s regulators also required Microsoft to make available a version of Windows that does not contain the built-in Media Player software and that Microsoft create a program to allow other server makers to buy the right to access Windows Server communications protocol.

“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,” the software giant said. “We have undertaken a constructive discussion with the commission and have now agreed on those additional steps.”

Winners and Losers

“We will not appeal the CFI’s decision 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,” Microsoft said.

Microsoft shares rose 1.5 percent in early trading Monday to $30.62. The software maker reports earnings on Thursday.

The licensing program has long been the sticking point for both sides. Microsoft had gone to great lengths to make the program affordable and cited some early third company sign-ups as evidence it was working, it said. The EU, however, hired an independent monitor who said the program was confusing and too costly for many smaller firms.

Microsoft agreed to a flat fee of 10,000 euros ($14,160) for companies to enroll in the program, the EU said.

‘A Needed Wake-Up Call’

Microsoft never did prevail in its arguments, but may have won a victory by having the case put to rest, allowing it to devote more resources to the competitive threats it faces, Enderle Group Principal Analyst Rob Enderle told the E-Commerce Times.

“Microsoft lost their battle with the EU but, in the end, it may actually leave the company stronger as they are now embracing interoperability and this was a needed wake-up call with regard to how big a disconnect there was between how they saw the competitive landscape and how the EU saw it,” Enderle said. “This was a significant distraction for the legal arm of Microsoft and did chew up a lot of resources as the company struggled to come into compliance.”

Microsoft should not be surprised if the EU’s help is solicited by other of its competitors going forward, meanwhile.

“While this is now in the rearview mirror, the ongoing oversight from the EU will likely be more than an annoyance as different competitors attempt to use that to further cripple the company,” Enderle added.

Lessons to Be Learned

Microsoft felt it had to fight the original penalties because it has guarded its Windows code zealously over the years, recognizing it as one of its most valuable assets, Yankee Group analyst Laura DiDio told the E-Commerce Times.

“Microsoft also felt the EU was being unduly harsh and trying to make an example out of them,” DiDio added. “They were willing to stand their ground, but over time it became more and more of a distraction and the chances of prevailing grew smaller.”

The decision not to appeal and the licensing program change reportedly came about after extensive negotiations between Microsoft and Kroes in recent weeks.

Studying the Case

Meanwhile, Microsoft is still dealing with the 2002 antitrust settlement in the U.S. The Wall Street Journal reported Monday that Microsoft will make changes to the Vista operating system ahead of a hearing next week sparked by a complaint by Google, which argued that the new platform unfairly locked out third-party search tools.

The Microsoft saga with the EU may also hold lessons for other companies, Enderle said. The regulatory body is already mulling the Google acquisition of DoubleClick and is known to be looking into Intel’s business practices as well.

“Others — and there will be others as the EU has a list of companies they plan to go after next — could likely learn a lot by studying the Microsoft case,” he said.