Microsoft loses appeal at EU court

WASHINGTON — WASHINGTON -- The European Union's second-highest court upheld yesterday a 2004 antitrust ruling against Microsoft Corp.'s dominant operating system that led to a $689 million fine.

Other American companies that dominate their markets, such as Apple Inc. in digital music, Google Inc. in Web search and Intel Corp. in computer chips, also might feel the sting.


Antitrust experts called the decision by the Court of the First Instance a landmark ruling that validated the aggressive approach recently taken by the European Union's competition commission - especially when compared with the Bush administration's more hands-off approach to regulating companies that exploit their market dominance.

The tougher standards set in Brussels, Belgium, in 2004 will dictate how multinational companies compete.


"The case is historic and good news for consumers, not just in Europe but in the United States and worldwide," said Robert H. Lande, a University of Baltimore law professor and director of the American Antitrust Institute, a consumer-focused think tank in Washington.

"Europe is the vigilant cop on the beat, and the United States ... is strolling around with the nightstick behind its back."

The European Court of First Instance in Luxembourg sided with competition commission officials on almost every major aspect of the Microsoft case, which centered on complaints that the software giant's business practices were designed to squash its rivals.

The court agreed that the company had improperly tied its Windows Media Player to its dominant Windows operating system and refused to adequately disclose software code to other companies so their products would work with Microsoft's.

But the emphatic confirmation of Europe's leading role on antitrust enforcement did not go over well with some in Washington.

Thomas O. Barnett, head of the Justice Department's Antitrust Division, said the decision protected competitors rather than competition. He said it could harm consumers "by chilling innovation and discouraging competition."

Rep. Robert Wexler, a Florida Democrat who chairs a House subcommittee overseeing U.S. relations with Europe, promised to hold a hearing on the ruling, which he derided as a "new form of protectionism."

Although the ruling has ramifications for Microsoft - including the record fine and threats of more if it doesn't comply - many of the issues it addresses are less relevant because of technological change.


The complaints behind the case date to 1998, before the rise of the Internet as a major computing platform.

Microsoft's Windows operating system runs the software that lets users perform tasks with their computers, giving the company great power to favor its own programs such as e-mail, word processors and music players. But Windows' importance has been blunted in the past decade, because many of those tasks can now be done through online programs accessed through Internet browsers.

As a result, yesterday's ruling isn't expected to have much immediate impact on U.S. computer users. For example, Microsoft already has been fulfilling one of its requirements under the case by selling a version of its Windows software without the integrated Windows Media Player in Europe. But it has no plans to sell a similar version here.

Investors shook off the news, sending Microsoft shares down only about 1 percent yesterday to $28.73.

The EU's antitrust stance might create challenges for Microsoft's high-tech brethren, even ones with which it competes.

Apple, Intel and Qualcomm Inc. are facing investigations into charges that they used anti-competitive behavior - and that consumers paid higher prices or received lesser products as a result.


"I think you're going to have to be nervous," said Edward P. Henneberry, co-chairman of the European practice group at the law firm Heller Ehrman LLP, of executives at those companies. "With the ruling as strong as it was, it will leave an open invitation to the competitors of these companies to complain that they are being blocked from being able to compete."

Jim Puzzanghera writes for the Los Angeles Times