Microsoft and EU face off over antitrust issues

Microsoft was today set to argue that the very way it, and other companies, do business is at stake when it goes before the EU’s second highest court in a bid to overturn a recording antitrust ruling levied against it two years ago.

In 2004, the Redmond, Washing-based company was fined a record €497m after the European Commission found Microsoft guilty of breaking the antitrust rules that govern fair play in business.

Its five-year investigation concluded Microsoft had taken advantage of its position as the leading supplier of software for PC operating systems to elbow in on rivals for work group server operating systems and for media players.

To solve these problems, the commission ordered Microsoft to share information and communications code with rivals to help them make software that worked smoothly with Windows and to market a version of Windows without the media player to give consumers a free choice of media software.

Both the world’s largest software company and its rivals argue the right to innovate lies at the heart of the case. Microsoft says it must be allowed to enhance its programmes and guard its intellectual property. Critics argue the giant cannot be allowed to use its near-monopoly to strangle competitors.

“At issue is whether companies can improve their products by developing new feature, and whether a successful company must hand over its valuable intellectual property to competitors,” Microsoft said in a statement.

The EU said in December that Microsoft had not done enough to help its rivals develop compatible software and threatened Microsoft with daily fines of up to €2m a day, backdated to December 15, unless it complied. It has not yet decided whether it will levy these extra fines.

The court hearing this week, which is expected to take five days, will thrash out Microsoft’s behaviour in the late 1990s with EU regulators using evidence from RealNetworks on the media player case and IBM, Novell, Oracle and Sun Microsystems on systems compatibility.

None of those companies are currently involved in the legal battle although they are members of two broad industry coalitions – the European Committee for Interoperable Systems and the Software & Information Industry Association – that will back the commission.

Microsoft’s actions have not stopped the emergence of a new force in the server market – the popular Linux software that shares its code openly.

Times may have changed, but Microsoft’s behaviour has not, ECIS asserted as it filed a new complaint with regulators in February, claiming that Microsoft was up to the same tricks on a wider scale.

ECIS lawyer and spokesman Thomas Vinje says the latest version of Microsoft’s desktop software, Vista – which is due in stores early next year – will try to squeeze out rivals by giving away security, search engine and office functions.

For Vinje, Microsoft vs. the European Commission has the potential to set the “rules of the road” for Microsoft before it launches Vista.

“The bottom line in this case is about the future, whether consumers will have the choice of that innovation in future or whether Microsoft will be allowed to contain competition and innovation,” he said.