The Hindu Business Line : EC ruling: What's in store for Microsoft?

THE European Commission's anti-trust ruling which says that Microsoft violated European Union law by abusing its "near monopoly" market power in the workgroup server and media player markets has a large number of ramifications all of which are not entirely clear at this point of time, partly because only its summary has been released.

What is known for certain now is that the EC requires the software giant to create "complete and accurate documentation" within 120 days which will enable the workgroup servers of other companies to be fully interoperable with Windows and to create a version of the Windows PC operating system which does not include the Media Player and to make this version available to computer makers within 90 days. In addition, Microsoft will have to pay a fine of approximately $613 million. It is further known that Microsoft can appeal - the company has, in fact, said that it will do so - and that the first round of appeals will go to the Court of First Instance in Luxembourg. If dissatisfied with the outcome, the company can move the European Court of Justice, Europe's highest court.

What is somewhat less clear is whether the EC ruling has global application - an important issue given the fact that, historically, Microsoft has had a unified global practice. While the commissions ruling made no mention of the scope of applicability, Microsoft has taken the position that the EC's actions will necessarily be confined to the European Union's borders. It is amusing to note that geo-political borders apparently continue to have a role to play in this age of headlong globalisation... .instances in which their existence is of benefit to large and powerful corporations.

While the ambiguities that mark the ruling now will, undoubtedly, be ironed out with its release in full and in the course of the appeals process, it bears noting that, a full six years after the US Department of Justice initiated a lawsuit to "put an end to Microsoft's unlawful campaign to eliminate competition, deter innovation and restrict consumer choice," there is no discernible change in the company's hard-charging business practices.

It may be recalled that, in 1998, US federal officials serving the Clinton Administration had filed a sweeping anti-trust suit against Microsoft the outcome of which, they believed, would change the way in which the American computer industry worked. However, the scope of the lawsuit had been substantially reduced by a federal appeals court and the 2002 settlement and, when the dust had settled, it had been found that the initiative had made no dent whatsoever on the Windows monopoly.

And yet, it is important to note that the fight between Microsoft and the Government in the country of its domicile is not over quite yet: A federal appeals court in Washington, D.C., is looking into whether the 2002 settlement should be tossed out in favour of the considerably stiffer remedies sought by the state of Massachusetts. And then again, there are other actions which are still pending.

Consumers in Minnesota, in a class action, are seeking damages of $425 million. The case - the first to be brought before a jury -- is in the trial stage and the proceedings are expected to go on for another three months or so. In Nebraska, a private antitrust claim on behalf of Windows 98 users, which had earlier been dismissed, has been revived again recently by the Nebraska Supreme Court. And then there is the Sun Microsystems' suit filed in March 2002, charging Microsoft with anti-trust, unfair competition and copyright violations. Sun had initially secured a broad injunction against Microsoft but, subsequently, an appeals court had whittled down the scope of the injunction by ruling that Microsoft need only stop distributing its own Java Virtual Machine. This case is scheduled to go to trial next year. And then again, in December 2003, RealNetworks had sued Microsoft for anti-trust violations and had sought damages in excess of $1 billion. A recent Microsoft request to have the case moved from San Jose, California, to Seattle, has been turned down and the matter is now in the pre-trial discovery phase.

And, finally, there is the 2002 Burst.com case in which the company had accused Microsoft of elbow-twisting customers into abandoning their use of the video-streaming technology from Burst.com. This case is still in the pre-trial discovery and motions phase and a trial date is yet to be set.

The Microsoft Chief Executive, Mr Steve Ballmer, has said the company will fight the EC ruling and has put forward the argument that all companies, including those with a near monopoly, have the right to improve their products. He has been quoted by the media as saying: "There is an important principle at stake in this case: We believe that every company should have the ability to improve its products to meet the needs of consumers. We recognise the sort of special position our company has, but nonetheless we think we should have that ability to improve our products, subject to the appropriate guidelines."

These fighting words notwithstanding, Mr Balmer has observed that while Microsoft and the European Union are squared off right now, the company expects an opportunity to settle the case. Obviously, he is falling back on the Microsoft experience in the US - which may or may not be relevant.

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