News Release
No. 46/04
March 24, 2004
MICROSOFT: QUESTIONS AND ANSWERS ON EU COMMISSION
DECISION
Microsoft is a US company. What gives the European Commission authority
to decide whether its behavior is legal or not?
Microsoft sells its products globally including in the European Union, which
is one of its main markets together with the United States. It must therefore
respect EU
competition rules in the same way that European companies must respect US
law when operating on the other side of the Atlantic.
What exactly must Microsoft do to comply with EU law?
The company has been ordered "to disclose complete and accurate specifications
for the protocols" necessary for its competitors' server products to
be able to “talk” on an equal footing with Windows PCs, and hence compete on a
level playing-field. It must also offer a version of Windows for client PCs which
does not include Windows Media Player. This applies to Windows sold directly to
end users or licensed to Original Equipment Manufacturers—i.e., PC manufacturers.
Does this go beyond what was agreed between Microsoft and the US Department
of Justice?
The US case presents certain similarities with the EU
case, and the Commission did take on board those points where the US settlement
had addressed its own concerns. But the EU case also presented different facts,
and given the European Commission's duty to uphold EU law in the European single
market, the remedies are designed to fit with the specifics of the EU case. As
regards interoperability, the Commission requires, inter alia, the disclosure
of certain server-to-server protocols not covered by the US case. As regards tying,
the US remedy did not contain provisions on code removal as it was designed for
a monopoly maintenance and not a tying liability.
Did the Commission co-operate with the United States on this case?
The Commission and the United States Department of Justice have kept each
other regularly informed on the state of play of their respective Microsoft cases,
including holding meetings at regular intervals. These meetings have been held
in a co-operative and friendly atmosphere, and have been substantively fruitful
in terms of sharing experiences on issues of common interest.
Does Microsoft have to pay the fine immediately?
The fine needs to be paid within three months of the date of notification
of the Decision.
Where does the money go?
The money goes into the EU's central budget.
Does Microsoft have to pay the fine if it appeals to the
European Court of First Instance (CFI) and seeks interim measures?
In case of appeals to the CFI, it is normal practice that instead of paying
the fine outright, companies, with the agreement of the Commission, provide a
bank guarantee. Any fine that is paid subsequently has interest payable on it.
The interest rate is that applied by the European Central Bank to its main refinancing
operations on the first day of the month in which the Decision is adopted, plus
3.5 percentage points. In the present case, that is 5.50%. This is normal practice
in all Decisions with fines.
What happens if Microsoft does not disclose the specified information
or offer a version of Windows without WMP within the deadlines outlined by the
Commission?
The remedies outlined in the Commission's Decision are legally binding, and
Microsoft is therefore obliged to comply. Experience shows that companies respect
such Decisions taken by the Commission, and the Commission has no reason to believe
that it will be any different this time. If a company does not comply with the
provisions of a Decision, it is liable for daily penalty payments.
What is the geographical scope of the remedies?
The Commission is competent to ensure the maintenance of effective competition
within the borders of the
EEA [European Economic Area]. In this respect, even if markets are defined
as world-wide in the Decision, the geographical scope of the remedies is EEA-wide.
Does the Commission's Decision seek to protect competitors?
The Commission does not look at the specific interests of individual companies,
but is charged with ensuring that competition on the merits is safeguarded. This
creates an environment where consumers can benefit and where innovation can flourish.
The Commission in its Decision has not taken up all the elements of Sun's original
complaint.
Are the Commission's legal theories in the case in any way novel?
The legal underpinning of the Commission's case is not in any way novel. Both
parts of the Commission's case are based on a consistent pattern of Court jurisprudence
(interoperability: inter alia, Commercial Solvents , Telemarketing , Magill
, and tying: inter alia, Hilti and Tetra Pak ).
Why does the Commission believe that the normal competition rules should
apply to fast-changing technology markets?
The specifics of the particular industry in question (be it "hi-tech"
or "old economy") must be taken into account when conducting any anti-trust
analysis. Differing characteristics will have an influence on the specific assessments
that are reached. This, however, does not mean that a soundly conducted anti-trust
analysis cannot be applied to "new economy" markets. In fact, the specific
characteristics of the market in question (e.g., network effects, applications
barrier to entry) could mean that there is in fact an increased likelihood of
positions of entrenched market power compared to certain "traditional industries."
Does Microsoft have intellectual property over the interface information
to be disclosed?
The Commission is not seeking disclosure of Microsoft's source code. The Commission
does not exclude that the information that the Decision obliges Microsoft to disclose
might be protected by intellectual property rights in the EU. To the extent that
it is, the Decision finds that in line with the relevant jurisprudence, the exceptional
circumstances of the case (Microsoft's overwhelming dominance, indispensability
of the interface information, risk of elimination of competition in the market)
would mandate such disclosure.
How will the Commission ensure that Microsoft does not exclude competitors
from the market by setting very high royalties for the information in question?
To the extent that any of the information in question is protected by intellectual
property rights in the EEA, Microsoft is entitled to reasonable remuneration.
It will be the role of the Monitoring Trustee, under the authority of the Commission,
to ensure that Microsoft does not charge too high a price for the information.
Is the Decision compatible with international rules on the protection
of intellectual property rights?
The Decision is fully consistent with the Community's international obligations,
in particular with those resulting from the WTO Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS Agreement). The TRIPS Agreement allows
the Commission to order the remedies to bring to an end the abuse of a dominant
position identified in the Decision.
Is the Commission's case in line with US law as far as unbundling of the
WMP is concerned?
Yes. The Commission has followed a "rule of reason" approach in
order to establish whether the anti-competitive effects of tying WMP outweigh
any possible pro-competitive benefits. This is precisely the framework for tying
cases that US Court of Appeals laid down in 2001.
Does the remedy on the media player mean that, in the future, Microsoft
will be forced to offer two versions of all the products it integrates in the
Windows operating system?
No, as any future case will be examined on its own merits. Having said that,
the Decision provides a framework within which allegations of future tying in
software markets can be examined.
When is the Decision going to be published?
The Decision in English (the official language version of the Decision) will
be made available shortly on DG Competition's website (once Microsoft's business
secrets have been taken out). French and German translations will also be made
available on DG Competition's website in due course. A summary of the Decision
will be published in the OJ L series in all languages (once the translations are
available).
Were the two sides ever close to a settlement?
Whilst there was significant progress towards resolving the issues of the
present case, the Commission cannot comment on the specifics of the settlement
discussions. The Commission believes that it is essential to establish clear principles
for the future conduct of a company with such a strong dominant position in the
market.
EU Competition
Commissioner Monti's Statement.
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Press Contacts:
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Anthony Gooch
202-862-9523
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Maeve O'Beirne
202-862-9549
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