EU v Microsoft: Round 73

The seemingly never-ending issue of Microsoft’s bundling of software with its operating system and the alleged anti-competitive effect has taken a new turn.

On 15 January the European Commission confirmed that it has sent a Statement of Objections (SO) to Microsoft on 15th January 2009.

The SO outlines the Commission’s preliminary view that Microsoft’s tying of its web browser Internet Explorer to its dominant client PC operating system Windows infringes the EC Treaty rules on abuse of a dominant position (Article 82).

In the SO, the Commission sets out evidence and outlines its preliminary conclusion that Microsoft’s tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice.

The SO is based on the legal and economic principles established in the judgment of the Court of First Instance of 17 September 2007 (case T-201/04), in which the Court of First Instance upheld the Commission's decision of March 2004 (see IP/04/382), finding that Microsoft had abused its dominant position in the PC operating system market by tying Windows Media Player to its Windows PC operating system (see MEMO/07/359).

The evidence gathered during the investigation has made the Commission believe that the tying of Internet Explorer with Windows, which makes Internet Explorer available on 90% of the world's PCs, distorts competition on the merits between competing web browsers insofar as it provides Internet Explorer with an artificial distribution advantage which other web browsers are unable to match. The Commission states that it is concerned that, through the tying, Microsoft shields Internet Explorer from head-to-head competition with other browsers which is detrimental to the pace of product innovation and to the quality of products which consumers ultimately obtain. In addition, the Commission expresses its concern that the ubiquity of Internet Explorer creates artificial incentives for content providers and software developers to design web sites or software primarily for Internet Explorer which ultimately risks undermining competition and innovation in the provision of services to consumers.

Microsoft has eight weeks to reply the SO, and will then have the right to be heard in an Oral Hearing should it wish to do so. If the preliminary views expressed in the SO are confirmed, the Commission may impose a fine on Microsoft, require Microsoft to cease the abuse and impose a remedy that would restore genuine consumer choice and enable competition on the merits.

Microsoft issued an unilluminating statement:

‘Yesterday Microsoft received a Statement of Objections from the Directorate General for Competition of the European Commission. The Statement of Objections expresses the Commission’s preliminary view that the inclusion of Internet Explorer in Windows since 1996 has violated European competition law. According to the Statement of Objections, other browsers are foreclosed from competing because Windows includes Internet Explorer. The Statement of Objections states that the remedies put in place by the U.S. courts in 2002 following antitrust proceedings in Washington, D.C. do not make the inclusion of Internet Explorer in Windows lawful under European Union law.

We are committed to conducting our business in full compliance with European law. We are studying the Statement of Objections now. Under European competition law procedure, Microsoft will be afforded an opportunity to respond in writing to this Statement of Objections within about two months. The company is also afforded an opportunity to request a hearing, which would take place after the submission of this response. Under EU procedure, the European Commission will not make a final determination until after it receives and assesses Microsoft’s response and conducts the hearing, should Microsoft request one.’

The Microsoft issues blog indicates that the company will provide a formal response to DG Comp within the next two months: ‘In the meantime, since this is a legal matter, we won’t have much to say publicly’.

Published: 2009-01-19T16:04:37

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