Microsoft Loses EC Anti-Trust Appeal; £340 Million Windows Media, Server Fine Upheld

Microsoft (NSDQ: MSFT) (NYSE:MSFT) has lost its appeal against the 2004 European Commission ruling it abused its dominant market position with respect to Windows Media Player and its server products. A case first brought 14 years ago snowballed when, in 2004, the commission charged Microsoft, in bundling the player with the operating system, had disadvantaged rival software makers. It fined the company EUR 497 million (£340 million), ordered it to sell a version of Windows without the player and commanded it to release server source code.

But, in a ruling (pdf) that name-checked RealNetworks (NSDQ: RNWK) as a competitor, the European Court of First Instance this morning rejected Microsoft’s appeal, stating: “The Court finds that the Commission clearly demonstrated in the contested decision that the fact that Microsoft offered OEMs only the version of Windows bundled with Windows Media Player had the inevitable consequence of affecting relations on the market between Microsoft, OEMs and suppliers of third-party media players by appreciably altering the balance of competition in favour of Microsoft and to the detriment of the other operators.”

But the court also said the commission exceeded its powers when it compelled Microsoft to install an independent figure to monitor legal compliance and who has been able to request access to source code and employees. It said the commission should not have laid the bill for this appointment at Microsoft’s door. Microsoft now has two months to appeal to the European Court of Justice. Microsoft was also left with a further EUR 280.5 million (£192.2 million) (that’s EUR 1.5 million, £1 million per day) from the first half of 2006, during which the commission said Microsoft failed to comply with the 2004 conditions placed upon it.

Reaction: “Microsoft can now expect to face further intense probing by the Commission, for example over the way that new functions have been bundled into Windows Vista, its latest operating system.” The European Commission’s competition commissioner Neelie Kroes welcomed what she called a “landmark” decision.