• United States

Microsoft files appeal in EU case

Jun 08, 20044 mins

As had been widely anticipated, Microsoft Tuesday filed its official appeal to the European Union’s Court of First Instance, defending itself against the European Commission’s competition decision earlier this year.

“Yes, we have filed the appeal with the Court in Luxembourg and the request for a temporary injunction, which is a separate issue, will come within the next few days or weeks,” said Tom Brookes, Microsoft’s spokesman in Brussels.

The request to stay the measures imposed by the Commission will be filed with the Court of First Instance.

“The Commission’s decision undermines the innovative efforts of successful companies, imposing significant new obligations on successful companies to license their proprietary technology to competitors, and restrict companies’ ability to add innovative improvements to their products. The legal standards set by the Commission’s Decision significantly alter incentives for research and development that are important to global economic growth,” said Horacio Gutierrez, Associate General Counsel, Microsoft EMEA (Europe Middle East and Africa) in a statement.

On March 24, the Commission fined Microsoft €497 million ($612 million) for violating European Union competition law through the use of its dominance in the PC operating system market to gain advantage in the markets for work group server operating systems and media players. The Commission — the EU’s executive branch — followed up the fine with a 302-page ruling in April that laid out its measures for increasing competition.

The Commission ruled that Microsoft had 90 days to begin selling a version of it Windows operating system in Europe without Media Player, the company’s audio and video playing software. Additionally, the Redmond, Wash., software maker must in 120 days after the ruling reveal enough Windows code to allow rivals to build competing server software that can work properly with Windows.

In its 100-page appeal brief filed to the CFI on Tuesday, Microsoft requested that it annul the Commission’s decision as well as nullify or substantially reduce the fine imposed.

The company said it could not make public the appeal brief since to do so would violate EU procedures.

An appeal to the CFI will take at least three years to conclude and the resulting decision could then be taken to the Court of Justice on a further appeal by either the Commission or Microsoft.

According to Thomas Vinje, a partner in the Brussels office of law firm Clifford Chance, Microsoft is unlikely to succeed on appeal as the Commission’s decision has been one of the most carefully formulated decisions in its history.

“The Commission’s decision is supported by lots of solid evidence of harm in the market, and it follows well-established precedent. The decision was also unanimously supported without any expressions of doubt by all member states,” said Vinje, who represented Microsoft rivals during the Commission’s investigation, including the Washington, D.C.-based lobbying group, the Computer and Communications Industry Association (CCIA).

Additionally, Vinje believes that Microsoft probably won’t be granted a temporary stay, Vinje said. “Microsoft will not be able to show that it will suffer irreparable harm from the imposition of the Commission’s decision.”

“Among other things, it has now agreed to provide to its arch-competitor Sun Microsystems the same interface information demanded by the Commission’s decision, so how can it be irreparably harmed by being required to treat other companies equally?” Vinje said. “And how can Microsoft be irreparably harmed by being required to sell an unbundled version of Windows when it is allowed to continue selling a bundled version?”

CCIA President and CEO Ed Black agrees with Vinje that, based on the law, Microsoft’s case for appeal isn’t strong. “They are basically throwing a Hail Mary pass (with the document). They’re desperately trying to somehow bring pressure on the Commission, and I think in a very silly, fruitless way,” Black said.

But both Vinje and Black are concerned that should Microsoft be able to delay the Commission’s enforcement of its ruling long enough, Microsoft will win by default. “There is perhaps a tipping point, a critical point, if delayed for two to three years, because it would basically nullify the ability of the Commission to have an impact,” Black said.

The balance of interests clearly favors rapid implementation of the Commission’s decision, Vinje said. “Competition in the relevant markets will be totally eliminated by the time the appeals are exhausted. Any speculative damage Microsoft might claim from implementation of the decision pales into insignificance in comparison with the harm to competition and consumers from a five-year suspension of the decision.”

(Stacy Cowley in New York contributed to this report.)