News Release
Mario Monti
March 24, 2004
No. 45/04
EU COMMISSION CONCLUDES MICROSOFT INVESTIGATION, IMPOSES
CONDUCT REMEDIES AND A FINE
The European Commission has concluded, after
a 5-year investigation, that
Microsoft Corporation broke European Union competition law by leveraging its
near monopoly in the market for PC operating systems (OS) onto the markets for
work group server operating systems (1) and for media players(2)
. Because the illegal behavior is still ongoing, the
Commission has ordered Microsoft to disclose to competitors, within 120 days,
the interfaces (3)
required for their products to be able to talk with the ubiquitous Windows OS.
Microsoft is also required, within 90 days, to offer a version of its Windows
OS without Windows Media Player to PC manufacturers (or when selling directly
to end users). In addition, Microsoft is fined 497.2 million for abusing its
market power in the EU.
EU
Competition Commissioner
Mario Monti
commented on the
decision in Brussels today: "Dominant companies have a special responsibility
to ensure that the way they do business doesn't prevent competition on the merits
and does not harm consumers and innovation. Today's decision restores the conditions
for fair competition in the markets concerned and establish clear principles for
the future conduct of a company with such a strong dominant position.
After an exhaustive and extensive investigation of more than 5 years and 3
statements of objections(4) , the Commission has
today taken a decision finding that US software company Microsoft Corporation
has violated the EU Treaty's competition rules by abusing its near monopoly(5)
(Article 82) in the PC operating system.
Microsoft abused its market power by deliberately restricting interoperability
between Windows PCs and non-Microsoft work group servers and by tying its Windows
Media Player (WMP), a product where it faced competition, with its ubiquitous
Windows operating system.
This illegal conduct has enabled Microsoft to acquire a dominant position
in the market for work group server operating systems, which are at the heart
of corporate IT networks, and risks eliminating competition altogether in that
market. In addition, Microsoft's conduct has significantly weakened competition
on the media player market.
The ongoing abuses act as a brake on innovation and harm the competitive process
and consumers, who ultimately end up with less choice and facing higher prices.
For these very serious abuses, which have been ongoing for 5½ years, the Commission
has imposed a fine of 497.2 million.
Remedies
In order to restore the conditions of fair competition, the Commission has
imposed the following remedies:
As regards interoperability, Microsoft is required, within 120 days, to disclose
complete and accurate interface documentation which would allow non-Microsoft
work group servers to achieve full interoperability with Windows PCs and servers.
This will enable rival vendors to develop products that can compete on a level
playing field in the work group server operating system market. The disclosed
information will have to be updated each time Microsoft brings to the market new
versions of its relevant products.
To the extent that any of this interface information might be protected by
intellectual property in the
European Economic Area (6) , Microsoft would
be entitled to reasonable remuneration. The disclosure order concerns the interface
documentation only, and not the Windows source code, as this is not necessary
to achieve the development of interoperable products.
As regards tying, Microsoft is required, within 90 days, to offer to PC manufacturers
a version of its Windows client PC operating system without WMP. The un-tying
remedy does not mean that consumers will obtain PCs and operating systems without
media players. Most consumers purchase a PC from a PC manufacturer which has already
put together on their behalf a bundle of an operating system and a media player.
As a result of the Commission's remedy, the configuration of such bundles will
reflect what consumers want, and not what Microsoft imposes.
Microsoft retains the right to offer a version of its Windows client PC operating
system product with WMP. However, Microsoft must refrain from using any commercial,
technological or contractual terms that would have the effect of rendering the
unbundled version of Windows less attractive or performing. In particular, it
must not give PC manufacturers a discount conditional on their buying Windows
together with WMP.
The Commission believes the remedies will bring the antitrust violations to
an end, that they are proportionate, and that they establish clear principles
for the future conduct of the company.
To ensure effective and timely compliance with this decision, the Commission
will appoint a Monitoring Trustee, which will, inter alia, oversee that
Microsoft's interface disclosures are complete and accurate, and that the two
versions of Windows are equivalent in terms of performance.
The investigation
In December 1998, Sun Microsystems, another US company, complained that Microsoft
had refused to provide interface information necessary for Sun to be able to develop
products that would "talk" properly with the ubiquitous Windows PCs,
and hence be able to compete on an equal footing in the market for work group
server operating systems.
The Commission's investigation revealed that Sun was not the only company
that had been refused this information and that these non-disclosures by Microsoft
were part of a broader strategy designed to shut competitors out of the market.
This relegated to a secondary position competition in terms of reliability,
security and speed, among other factors, and ensured Microsoft's success on the
market. As a result, an overwhelming majority of customers informed the Commission
that Microsoft's non-disclosure of interface information artificially altered
their choice in favour of Microsoft's server products. Survey responses submitted
by Microsoft itself confirmed the link between the interoperability advantage
that Microsoft reserved for itself and its growing market shares.
In 2000, the Commission enlarged its investigation, on its own initiative,
to study the effects of the tying of Microsoft's Windows Media Player with the
company's Windows 2000 PC operating system.
This part of the investigation concluded that the ubiquity which was immediately
afforded to WMP as a result of it being tied with the Windows PC OS artificially
reduces the incentives of music, film and other media companies, as well software
developers and content providers to develop their offerings to competing media
players.
As a result, Microsoft's tying of its media player product has the effect
of foreclosing the market to competitors, and hence ultimately reducing consumer
choice, since competing products are set at a disadvantage which is not related
to their price or quality.
Available data already show a clear trend in favour of WMP and Windows Media
technology. Absent intervention from the Commission, the tying of WMP with Windows
is likely to make the market "tip" definitively in Microsoft's favour.
This would allow Microsoft to control related markets in the digital media sector,
such as encoding technology, software for broadcasting of music over the Internet
and digital rights management etc.
More generally, the Commission is concerned that Microsoft's tying of WMP
is an example of a more general business model which, given Microsoft's virtual
monopoly in PC operating systems, deters innovation and reduces consumer choice
in any technologies which Microsoft could conceivably take interest in and tie
with Windows in the future.
Note to editors
The European Commission enforces EU
competition rules on restrictive business practices and abuses of monopoly
power for the whole of the European Union when cross-border trade and competition
are affected.
The Commission has the power to force changes in company behaviour and to
impose financial penalties for antitrust violations of up to 10% of their annual
turnover worldwide.
Commission decisions can be appealed to the European Court of First Instance
in Luxembourg.
FULL TEXT OF THE MICROSOFT DECISION.
More.
(1) These are operating systems running on central network
computers that provide services to office workers around the world in their day-to-day
work, such as file and printer sharing, security and user identity management.
(2) A media player is a software product that is able to play
back music and video content over the Internet.
(3) The interfaces do not concern the
Windows source code, as this is not necessary to achieve the development of interoperable
products. The interfaces are the hooks at the edge of the source code which allow
one product to talk to another.
(4) A Statement of Objections marks the opening of a formal
investigation as the Commission states its charges or objections to the company(ies)
concerned.
(5) Microsoft's operating systems equip more than 95% of the
world's personal computers.
(6) The European Union plus Norway, Iceland and Liechtenstein.
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Press Contacts:
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Anthony Gooch
202-862-9523
|
Maeve O'Beirne
202-862-9549
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