14 DAY TRIAL // Microsoft's presence on the European market has ended up costing the company ?497 million as a consequence of an antitrust ruling passed by the European Commission antitrust regulators in March 2004. The EU decision was almost entirely upheld by the European Court of First Instance in Luxembourg and the financial penalties supported in their totality, marking a resounding defeat for Microsoft, found guilty of abusing its Windows monopoly in order to gain an unfair advantage on the digital media player and work group server market. While the turn of events was to be expected, Microsoft did put up a battle, however at this point the company seems ready to cut its losses and comply with the conclusion rather than issue an appeal. Still, while Brad Smith, Senior Vice President, General Counsel, Corporate Secretary, Legal & Corporate Affairs, Microsoft treated the matter with diplomacy, the Redmond company got a sign of support from the U.S. government, while at the same time sending a message to the European Union.
"The Justice Department is concerned that the standard applied to unilateral conduct by the (European Court of First Instance), rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition... In the United States, the antitrust laws are enforced to protect consumers by protecting competition, not competitors. In the absence of demonstrable consumer harm, all companies, including dominant firms, are encouraged to compete vigorously. U.S. courts recognize the potential benefits to consumers when a company, including a dominant company, makes unilateral business decisions, for example to add features to its popular products or license its intellectual property to rivals, or to refuse to do so," stated Thomas Barnett, the assistant attorney general for the U.S. Justice Department's antitrust division as cited by SeattlePI.
This course of events is in no way close to normal. In fact the separate legal entities in Europe and the United States should have nothing to do with one another. However, Microsoft has been turned from a predatory monopolist in the Clinton era in the U.S. into a fair competitor under the Bush administration. The fact of the matter is that the U.S. Department of Justice has dropped its aggressive policy against Microsoft under Bush and now rose up to even defend the company in Europe. Microsoft obviously has a lot of friends in high places in Washington.
Neelie Kroes, the EU competition commissioner responded immediately to the criticism from the Justice Department: "I think it's totally unacceptable that a representative of the U.S. administration criticize an independent court outside its jurisdiction. And I even think it shouldn't be done inside, but that's not my cup of tea. It is absolutely not done. The European Commission does not pass judgment on rulings on U.S. courts, and we expect the same degree of respect from U.S. authorities for rulings by EU courts. And if the parties to a case are unhappy with the Court of First Instance ruling, they can appeal to the Court of Justice, and that is well known by those parties."
But Microsoft was nothing more than a taste in the antitrust arena that is Europe. Following the favorable decision delivered by the Court of First Instance, Kroes made it clear that the European Commission will continue to promote consumer choice by keeping monopolist companies on a short leash in order to drive competitiveness. This applies especially to the high tech industry. But while the EU antitrust regulators still have to ensure that Microsoft will be forced to comply swiftly with the legal obligations delivered against it, Kroes is also gunning for the next monopolist. And at this time it could be Intel, Apple or even Google.
Microsoft of course had a few suggestions. "The decision very clearly gives the Commission quite broad power and discretion. There are many companies in our industry that have a very large market share. People talk about Windows with 95 percent, or our server share of 60-80 percent. As I mentioned before, Apple has a 70 percent share for digital music in Europe; Google has a 70-80 percent share for search - in some countries in Europe, it has over a 90 percent share. IBM has 99-100 percent share for mainframe computers in Europe and the rest of the world," Smith specified the companies that Microsoft would want to see in the same position as itself.