Microsoft fails to meet European Union settlement
CNN-Tech
BRUSSELS (Reuters) - The European Commission and Microsoft failed to settle antitrust charges Thursday, removing the last obstacle to a landmark ruling next week branding the company an abusive monopolist.
"I'd just like to inform you that a settlement on the Microsoft case has not been possible," Competition Commissioner Mario Monti told a news conference after three days of top-level talks with the world's largest software firm.
<A href="http://cgi.money.cnn.com/mgi/mgi_search?QUERY=MSFT">Microsoft</A> (<A href="http://quote.money.cnn.com/quote/quote?symbols=MSFT">MSFT</A>, <A href="http://cnnfn.multexinvestor.com/Reports.aspx?ticker=MSFT">Research</A>, <A href="http://cgi.money.cnn.com/firstcall/fc?ticker=MSFT">Estimates</A>) had no immediate comment on the breakdown, but a spokesman said the company would issue a statement shortly. Its shares dipped 1.2 percent to $24.84 on the Nasdaq in afternoon trading.
The EU decision, to be adopted next Wednesday, will require Microsoft to supply a second version of its ubiquitous Windows operating system stripped of built-in audiovisual software. That would go further than the steps Microsoft had to take when it settled an antitrust case in the United States in late 2001.
The U.S. settlement called on Microsoft to share parts of its software code for Windows but did not restrict the features Microsoft could incorporate in its Windows operating system, which is used on about 90 percent of the world's personal computers.
The finding by European regulators comes about three years after a federal judge in the U.S. ruled that Microsoft had violated U.S. antitrust laws by abusing its monopoly power in computer operating systems -- a finding that eventually led to the settlement in the United States.
Brussels will also order the company to share proprietary information with rival server makers and levy a fine running to hundreds of millions of euros. Most importantly, Microsoft will be formally ruled to have abused its dominant market position in the European Union, as it was in a 2001 final appeals court ruling in the United States. <A href="http://money.cnn.com/markets/snapshots/Technology__Software.html">Click here to check software stocks</A>
That decision could open the way for further legal action against Microsoft in all European Union countries -- 25 of them after May 1 -- if the company is seen to be competing unfairly. The Commission is probing two other cases against Microsoft. Microsoft Chief Executive Steve Ballmer negotiated with Monti for four hours Tuesday and again on Wednesday and Thursday, to avoid the formal decision.
Monti praised Microsoft's efforts, but said they fell short because the software powerhouse was unwilling to make commitments to change its future business practices. A centerpiece of the Commission inquiry has been to go beyond the specifics of this case and focus more broadly on Microsoft's use of its market dominance to crush smaller rivals.
"The aspect of setting a clear and strong legal precedent is indeed of key importance," Monti said. "It is very important to have such a precedent to guide the conduct of such a dominant company in cases which are either there or on the horizon."
Microsoft reached settlements with the Commission in 1994 and 1997. It has headed off other EU investigations by agreeing to change its behavior towards particular companies. But in Monti's view, none of those settlements prevented the recurrence of similar competition problems. "I therefore intend to propose to my colleagues... to adopt a decision that has already received the unanimous backing of the member states," Monti said.
An antitrust lawyer representing some of Microsoft's rivals praised Monti's decision. "This is a great victory for European consumers and for the information and communications technology industries," said Thomas Vinje of Clifford Chance.
Microsoft is certain to appeal against a Commission decision in the European courts. Litigation could take several years and Microsoft is very likely to seek a suspension of the remedies against it during that time. The Commission draft proposal calls on Microsoft to offer two versions of Windows to computer makers, one with Windows Media Player embedded and one without it. Microsoft contends it cannot do so without breaking Windows. But a rival audiovisual software maker, <A href="http://cgi.money.cnn.com/mgi/mgi_search?QUERY=RNWK">RealNetworks</A> (<A href="http://quote.money.cnn.com/quote/quote?symbols=RNWK">RNWK</A<A href="http://cnnfn.multexinvestor.com/Reports.aspx?ticker=RNWK">Research</A>, <A href="http://cgi.money.cnn.com/firstcall/fc?ticker=RNWK">Estimates</A>), gave a demonstration to the Commission at a hearing to argue that Windows Media Player could be removed without harm.
The exact size of the fine will be approved by a meeting of member states Monday.
Kind of interesting, eh? Not quite sure what it all means, but what I grasp is that this is a good chance for software contenders to take a stab at leaping ahead in OS sales while Microsoft is on the downside in Europe.
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