Sandra Marco Colino: Competition Law of the EU and UK 7e

Key case 22.2

Microsoft Corporation (2007/53/EC, (2007) OJ L32/23); Microsoft Corporation v

Commission case T-201/04 R [2005] 4 CMLR 18 (interveners); [2005] 4 CMLR 5 (interim
measures); T-201/04, judgment of 17 September 2007-Commission decision (art. 102);
GC preliminary measures and final judgment

Facts

Microsoft is the most prominent provider of operating systems for desktop and laptop
computers in the world. Its Windows operating system (OS) is found on over 90 per cent
of computers. In December 1998 DG Comp received a complaint from Sun Microsystems
Inc. stating that Microsoft was abusing its dominant position on the OS market by refusing
to supply interoperability information relevant to software products necessary for network
computing (work group server systems) and that without such information competitors in
this market could not develop products that were fully compatible with the dominant
Windows OS. In February 2000 the Commission opened a case in relation to the supply
by Microsoft of Windows Media Player which was being incorporated into its Windows
2000 OS. In August 2001 a statement of objections (SO) was sent to Microsoft relating to
the Media Player development, and the Commission incorporated into this an earlier SO
relating to the interoperability issue. On 24 March 2004 the Commission took a decision
finding that both practices were in breach of art. 102 TFEU, and imposed a penalty on
Microsoft of €497,196,304. The Commission required Microsoft: (1) to make the
interoperability information available to any relevant undertaking on reasonable and non-
discriminatory terms; (2) to keep this information up to date in a timely manner; (3) to
create an evaluation mechanism to support this system; (4) to notify the Commission of
the measures it was taking; and (5) to offer a full functioning version of its OS which did
not incorporate Media Player (significant fines were subsequently imposed for breaches of
the first set of conditions relating to interoperability). Microsoft appealed, and at an interim
stage asked the President of the GC to suspend the effect of the Commission decision by
way of interim relief. This request was denied. Various third parties sought to take part in
the proceedings, and a number of requests to intervene were granted.

Findings

Microsoft did not argue before the Court that it was not in a dominant position in the
market for PC operating systems. What it said was that the Court should annul the
decision, or in the alternative should reduce the amount of the penalty and award it costs.
The Court held first that while the Commission had a margin of appreciation in economic
and technical matters, the Court was required to review the Commission's interpretation of
economic and technical data, and determine whether evidence relied on was factually
accurate, reliable, and consistent, and that no relevant material was ignored (para. 89).
Microsoft argued that the requirement to disclose interoperability information as
determined by the Commission would amount to a restriction on the free exercise of its
intellectual property rights, and argued that criteria established in Magill and IMS (see this
chapter) were not met. The Commission had adopted its decision on the basis that it was
indeed dealing with IP rights and chose the strictest legal test (para. 284). In certain
circumstances, the GC stated, an undertaking's refusal to supply IP protected material

© Sandra Marco Colino, 2011.

 Sandra Marco Colino: Competition Law of the EU and UK 7e

could constitute an abuse of a dominant position (paras 319-31), but these circumstances
must be exceptional (para. 332). In the present case the information required was indeed
indispensable, competition would have been eliminated were the information not supplied,
and the emergence of a new product for which there was demand was being frustrated
(art. 102(b) TFEU makes reference to 'limiting production, markets or technical
developments').

Finally there was no objective justification for Microsoft's refusal to supply the data
required. In relation to the issue of the bundling, or tying, of Media Player with the
Windows OS the GC held that there existed two separate products, with independent
demand for applications software with streaming capabilities. Following from
Tetra Pak and Hilti the Court found that an abuse had also taken place in this practice.
On one ground only did the Commission incur a significant loss. It had appointed an
independent monitoring trustee to supervise the interoperability disclosure process, and
the GC held that the trustee had been given powers which were not legally the
Commission's to provide.

Comment

Microsoft Corporation has had extensive engagement with, and impact on, competition
law in a number of jurisdictions, and serves as the exemplar of a multinational corporation
subject to the strictures of disparate national competition laws. It operates at the time of
writing under the restrictions of a consent decree in the US (with reporting requirements
imposed-see the DOJ website), and has negotiated with the EU Commission in relation to
the development of its Vista platform. There has been significant comment as to the extent
to which competition law may be appropriately applied to the 'new technologies', which are
information dependent, which move quickly, and where competition is sometimes
described as being for the market, rather than in the market. In the present case the
analysis of the issue of tying/bundling follows that applied in relation to food packaging
systems and to fixing materials in the construction industry. The present case was
launched by DG Comp in February 2000, and the judgment of the GC in the appeal was
given in September 2007, seven years and seven months after the proceedings opened.
Two issues dominate the case: the first is that of the extent to which the standards
imposed under EU law stifle development in integrated high-tech products (should, for
example, spelling checkers not be supplied with word processing software?), or enhance
competition; the second that of whether by requiring the disclosure of intellectual property
the EU is reducing the incentive to invest in product development. Comment from the US
following the judgment was strident and critical, although a more measured debate among
US antitrust lawyers following the decision was more supportive of the approach of DG
Comp. The EU approach has been followed elsewhere-in Korea, for example. It was
hoped that the GC judgment might address some of these fundamental issues head on,
and might provide a robust and critical underpinning for the development of competition
law into the twenty-first century, but in fact the judgment avoids larger statements, and
deals rather with both aspects of the case on a fairly traditional and uncritical basis.

Further reading

AHLBORN, C., and EVANS, D. S., ‘The Microsoft Judgment and Its Implications for
Competition Policy Towards Dominant Firms in Europe’, (2009) 75 Antitrust Law

© Sandra Marco Colino, 2011.

 Sandra Marco Colino: Competition Law of the EU and UK 7e

Journal 3

© Sandra Marco Colino, 2011.