Microsoft Corp v Commission (2007) T-201/04 is a case brought by the European Commission of the European Union (EU) against Microsoft for abuse of its dominant position in the market (according to competition law). It started as a complaint from Sun Microsystems over Microsoft's licensing practices in 1993, and eventually resulted in the EU ordering Microsoft to divulge certain information about its server products and release a version of Microsoft Windows without Windows Media Player. The European Commission especially focused on the interoperability issue.
|Microsoft v. Commission|
|Submitted 7 June 2004|
Decided 17 September 2007
|Full case name||Microsoft Corp. v Commission of the European Communities|
|Case Type||Action for annulment, Appeal against penalty|
|Nationality of parties||United States|
In 1993, Novell claimed that Microsoft was blocking its competitors out of the market through anti-competitive practices. The complaint centered on the license practices at the time which required royalties from each computer sold by a supplier of Microsoft's operating system, whether or not the unit actually contained the Windows operating system. Microsoft reached a settlement in 1994, ending some of its license practices.
In 1998, Sun Microsystems raised a complaint about the lack of disclosure of some of the interfaces to Windows NT. The case widened when the EU examined how streaming media technologies were integrated with Windows.
Citing ongoing abuse by Microsoft, the EU reached a preliminary decision in the case in 2003 and ordered the company to offer both a version of Windows without Windows Media Player and the information necessary for competing networking software to interact fully with Windows desktops and servers. In March 2004, the EU ordered Microsoft to pay €497 million ($794 million or £381 million), the largest fine ever handed out by the EU at the time, in addition to the previous penalties, which included 120 days to divulge the server information and 90 days to produce a version of Windows without Windows Media Player.
The next month Microsoft released a paper containing scathing commentary on the ruling including: "The commission is seeking to make new law that will have an adverse impact on intellectual property rights and the ability of dominant firms to innovate." Microsoft paid the fine in full in July 2004.
In 2004, Neelie Kroes was appointed the European Commissioner for Competition; one of her first tasks was to oversee the fining brought onto Microsoft. Kroes has stated she believes open standards and open source are preferable to anything proprietary:
Microsoft has a compliant version of its flagship operating system without Windows Media Player available under the negotiated name "Windows XP N". In response to the server information requirement, Microsoft released the source code, but not the specifications, to Windows Server 2003 Service Pack 1 (SP1) to members of its Work Group Server Protocol Program (WSPP) on the day of the original deadline. Microsoft also appealed the case, and the EU had a week-long hearing over it. Neelie Kroes stated:
Indeed, the monitoring trustee appointed in October 2005, from a shortlist put forward by Microsoft, believes that the decision clearly outlines what Microsoft is required to do. I must say that I find it difficult to imagine that a company like Microsoft does not understand the principles of how to document protocols in order to achieve interoperability.
On 12 July 2006, the EU fined Microsoft for an additional €280.5 million (US$448.58 million), €1.5 million (US$2.39 million) per day from 16 December 2005 to 20 June 2006. The EU threatened to increase the fine to €3 million ($4.81 million) per day on 31 July 2006 if Microsoft did not comply by then.
The case of Microsoft v Commission shed light on the difference of judgments between the US Antitrust Laws and EU Competition Law. In regard to Competition Law, when the Commission, incorrectly decides that a behavior by a firm is abusive (when in fact it is not), the business of the firm is harmed, and the consumers lose out by missing out on the products or services offered by the business. In this situation, the law is over-inclusive, and is known as a ‘False Positive’. The US Antitrust Laws are more concerned with false positives and the authorities are more likely to step back.
The second scenario, where the Commission concludes that a behavior by a firm is not abusive (but it is), the firm is left alone to its own devices and to its anti-competitive practices, which may affect the competition process and cause irreparable damages, and ultimately the consumers are harmed. As a result of the law being under-inclusive, the firms get away with their anti-competitive practices. This is known as a ‘False Negative’, and the European Union Competition Commission is more concerned with this, and it would rather interfere than step back.
The US court’s fear of false positives was seen in the case of Verizon Communication Inc v Law offices of Curtis Trinko (2004) which was about refusal to supply.The US Supreme court stated that it had to include a realistic comparison between the costs and the benefits of antitrust intervention. It stated that mistaken conclusions and false condemnations are very costly and that they negate the purpose which antitrust laws are designed to protect.  In the EU, the case relevance is IMS Health GmbH & Co. OHG v NDC Health GmbH & CO. KG, in which the Court of Justice laid down limited conditions under which a dominant firm’s refusal to license IP to a competitor constitutes an abuse of a dominant position in violation of Article 82 of the Treaty establishing the European Community (Now Article 102 TFEU).
The main concern raised in Microsoft v Commission was whether two distinct products were a subject of a tie. Tying is a specific type of exclusionary abuse which refers to the situation where customers that purchase one product (the tying product) are also required to purchase another product from the dominant undertaking (the tied product). This is intended to provide the customers with better products in the most cost-effective ways. However, an undertaking which is dominant in one product market can harm consumer benefit through tying by foreclosing the market for other products. The Commission’s findings showed that Microsoft had tied its Windows Media Player to it’s personal computer operating system. There was serious evidence to point out that Microsoft advertised the Windows Media Player as a standalone product and download it by itself, it was designed to work with competitor’s operating systems, separate licensing agreements for the media player. Alden F. Abbott (U.S. Federal Trade Commission) while visiting the Center for Competition Law and Policy at the University of Oxford, in his paper on ‘A Brief comparison of European and American Antitrust Law’ talked about the early intervention of the European enforcers in regard to bundling/tying practices which conforms to the idea about the European Union and its concern for False Negatives. He states that bundling carried out by a dominant firm is likely to be found more concerning by the EU than the American Enforcers.
Neelie Kroes, the then Commissioner for EU Competition Policy stated that Microsoft had continued to abuse its powerful market position and hindering innovation by charging extraordinary royalties to companies for providing crucial data to computer users around the world. She also goes on to state that main aim of the competition policy is to avoid consumer harm and to produce consumer benefits. However, the Assistant Attorney General at that time for Antitrust, R. Hewitt Pate issued a statement on the EC’s decision in its Microsoft investigation. He commented that the US Antitrust Laws are enforced to protect the consumers by protecting the competition, not competitors. The Commission’s Guidance on Article 102, states that the commission will normally only intervene where the conduct concerned has already been or is capable of hampering competition from competitors which are considered to be as efficient as the dominant undertaking. The commission is mindful that what really matters is protecting an effective competition process and not simply protecting competitors. This may well mean that competitors who deliver less to consumers in terms of price, choice, quality and innovation will leave the market.
With regards to tying of the WMP, the commission found out that customers were unable to buy windows without WMP, and they install any alternative software alongside WMP. Microsoft argues that customers need not use it and that they did not have to pay extra for it. Microsoft argues that tying of WMP allowed the consumers to have their personal computers running with default options, out of the box, which lowered the transaction cost by reducing time and confusion.
The decision highlighted that tying in this particular case would result in foreclosing the competition in this market. There was evidence that even though the other media players were rated higher in quality, WMP’s usage increased due to the tying process. The commission ordered that Microsoft should sell in Europe, a full functioning version of windows without WMP. It also asked Microsoft to refrain from promoting WMP over competitors through Windows or providing selective access to Window’s API’s. Microsoft was also restricted from giving discount to customers who were buying the operating system together with WMP, which would restrict the user’s choice to select the version without the player, and unbundled version had to have similar performance with the bundled version.
Richard Whish in his textbook goes on to say that the way in which Article 102 has been construed, has led academic commentators to compare it alongside with ordoliberalism, which is capable of having negative effects on the competition process, but disagrees by stating that at the heart of Article 102, the main objectives of EU commission are competition, efficiency, and welfare.
On 17 September 2007, Microsoft lost their appeal against the European Commission's case. The €497 million fine was upheld, as were the requirements regarding server interoperability information and bundling of Media Player. In addition, Microsoft has to pay 80% of the legal costs of the Commission, while the Commission has to pay 20% of the legal costs by Microsoft. However, the appeal court rejected the Commission ruling that an independent monitoring trustee should have unlimited access to internal company organization in the future. On 22 October 2007, Microsoft announced that it would comply and not appeal the decision any more, and Microsoft did not appeal within the required two months as of 17 November 2007.
Microsoft announced that it will demand 0.4% of the revenue (rather than 5.95%) in patent-licensing royalties, only from commercial vendors of interoperable software and promised not to seek patent royalties from individual open source developers. The interoperability information alone is available for a one-time fee of €10,000 (US$15,992).
On 27 February 2008, the EU fined Microsoft an additional €899 million (US$1.44 billion) for failure to comply with the March 2004 antitrust decision. This represented the largest penalty ever imposed in 50 years of EU competition policy until 2009, when the European Commission fined Intel €1.06 billion ($1.45 billion) for anti-competitive behaviour. This latest decision follows a prior €280.5 million fine for non-compliance, covering the period from 21 June 2006 until 21 October 2007. On 9 May 2008, Microsoft lodged an appeal in the European Court of First Instance seeking to overturn the €899 million fine, officially stating that it intended to use the action as a "constructive effort to seek clarity from the court".
In its 2008 Annual Report Microsoft stated:
On 27 June 2012, the General Court upheld the fine, but reduced it from €899 million to €860 million. The difference was due to a "miscalculation" by the European Commission. The commission's decision to fine Microsoft was not challenged by the court, saying the company had blocked fair access to its markets. E.U. competition commissioner, Joaquín Almunia, has said that such fines may not be effective in preventing anti-competitive behavior and that the commission now preferred to seek settlements that restrict businesses' plans instead. As such, The New York Times called the Microsoft decision "a decision that could mark the end of an era in antitrust law in which regulators used big fines to bring technology giants to heel."
A spokesperson for Microsoft said the company was "disappointed with the court’s ruling" and felt the company had "resolved [the commissions'] competition law concerns" in 2009, making the fine unnecessary. He declined to say whether Microsoft would file an appeal or not. Almunia called the ruling a vindication of the crackdown on Microsoft and warned "The judgment confirms that the imposition of such penalty payments remains an important tool at the commission’s disposal." He also claimed that the commission's actions against Microsoft had allowed "a range of innovative products that would otherwise not have seen the light of day" to reach the market.
The fines will not be distributed to the companies that lost income due to Microsoft practices. The money paid in fines to the European Court goes back into the EU budget.
In January 2009, the European Commission announced it would investigate the bundling of Internet Explorer with Windows operating systems from Microsoft, saying "Microsoft's tying of Internet Explorer to the Windows operating system harms competition between web browsers, undermines product innovation and ultimately reduces consumer choice." In response, Microsoft announced that it would not bundle Internet Explorer with Windows 7 E, the version of Windows 7 to be sold in Europe.
On 16 December 2009, the European Union agreed to allow competing browsers, with Microsoft providing a "ballot box" screen letting users choose one of twelve popular products listed in random order. The twelve browsers were Avant, Chrome, Firefox, Flock, GreenBrowser, Internet Explorer, K-Meleon, Maxthon, Opera, Safari, Sleipnir, and Slim which are accessible via BrowserChoice.eu. The automatic nature of the BrowserChoice.eu feature was dropped in Windows 7 Service Pack 1 in February 2011 and remained absent for 14 months despite Microsoft reporting that it was still present, subsequently described by Microsoft as a "technical error". As a result, in March 2013 the European Commission fined Microsoft €561 million to deter companies from reneging on settlement promises.
The Community acquis or acquis communautaire (; French: [aˌki kɔmynoˈtɛːʁ]), sometimes called the EU acquis and often shortened to acquis, is the accumulated legislation, legal acts, and court decisions which constitute the body of European Union law. The term is French: acquis meaning "that which has been acquired or obtained", and communautaire meaning "of the community".Court of Justice of the European Union
The Court of Justice of the European Union (CJEU) (French: Cour de justice de l'Union européenne) is the institution of the European Union (EU) that encompasses the whole judiciary. Seated in the Kirchberg quarter of Luxembourg City, Luxembourg, it consists of two separate courts: the Court of Justice and the General Court. From 2005 to 2016 it also consisted of the Civil Service Tribunal. It has a sui generis court system, meaning "of its own kind", and is a supranational institution.CJEU is the chief judicial authority of the European Union and oversees the uniform application and interpretation of European Union law, in co-operation with the national judiciary of the member states. CJEU also resolves legal disputes between national governments and EU institutions, and may take action against EU institutions on behalf of individuals, companies or organisations whose rights have been infringed.Decision (European Union)
In European Union law, a decision is a legal instrument which is binding upon those individuals to which it is addressed. They are one of three kinds of legal instruments which may be effected under EU law which can have legally binding effects on individuals. Decisions may be addressed to member states or individuals. The Council of the European Union can delegate power to make decisions to the European Commission.The legislative procedure for adoption of a decision varies depending on its subject matter. The ordinary legislative procedure (formerly known as the Codecision procedure) requires agreement of and allows amendments by both the European Parliament and the Council of the European Union. The Assent procedure requires agreement of both Parliament and Council, but the Parliament can only agree or disagree to the text as a whole - it cannot propose amendments. The Consultation procedure requires agreement of the Council alone, the Parliament merely being consulted on the text. In some areas, such as competition policy, the Commission may itself issue decisions.
Common uses of decisions involve the Commission ruling on proposed mergers, and day-to-day agricultural matters (e.g. setting standard prices for vegetables).On the basis of case law, decisions may have direct effect, that is to say they may be invoked by individuals before national courts.The individuals or "undertakings" addressed by the decision will have "locus standi" to challenge the decision, but they must do so within 6 weeks.Direct applicability
A concept of European Union constitutional law that relates specifically to regulations, direct applicability (or the characteristic of regulations to be directly effective) is set out in Article 288 (ex Article 249) of the Treaty on the Functioning of the European Union (as amended by the Lisbon Treaty).Although often confused with the doctrine of direct effect, direct applicability refers to the fact that regulations require no implementing legislation within individual member states - they take effect as soon as they are published by the European Commission.
This confusion is perhaps explained by reference to the treaty provision governing regulations which provides that they, and only they, have direct applicability within the member states. The early jurisprudence of the ECJ suggested that 'direct effect' was a consequence of direct applicability as it was thought that the drafters of the original treaty intended regulations, and only regulations, to be directly effective. However, the expansion of the doctrine of direct effect to include directives and other measures served to create a distinction between direct applicability and direct effect. Direct applicability is now taken to mean that regulations require no domestic implementation - if direct effect was only ever intended to be a consequence of direct applicability then the relationship has been severed by a series of ECJ cases.Direct effect of European Union law
In European Union law, direct effect is the principle that Union law may, if appropriately framed, confer rights on individuals which the courts of member states of the European Union are bound to recognise and enforce.
Direct effect is not explicitly stated in any of the EU Treaties. The principle of direct effect was first established by the Court of Justice of the European Union (CJEU) in Van Gend en Loos v. Nederlandse Administratie der Belastingen. Direct effect has subsequently been loosened in its application to treaty articles and the ECJ has expanded the principle, holding that it is capable of applying to virtually all of the possible forms of EU legislation, the most important of which are regulations, and in certain circumstances to directives.
The ECJ first articulated the doctrine of direct effect in the case of Van Gend en Loos, the European Court of Justice laid down the criteria (commonly referred to as the "Van Gend criteria") for establishing direct effect. The EU article provision had to be:
negative (a negative rather than a positive obligation)
containing no reservation on the part of the member state, and
not dependent on any national implementing measure.If these criteria were satisfied, then the right or rights in question could be enforced before national courts. Whether or not any particular measure satisfies the criteria is a matter of EU law to be determined by the EU Courts.Directive (European Union)
A directive is a legal act of the European Union which requires member states to achieve a particular result without dictating the means of achieving that result. It can be distinguished from regulations, which are self-executing and do not require any implementing measures. Directives normally leave member states with a certain amount of leeway as to the exact rules to be adopted. Directives can be adopted by means of a variety of legislative procedures depending on their subject matter.
The text of a draft directive (if subject to the co-decision process, as contentious matters usually are) is prepared by the Commission after consultation with its own and national experts. The draft is presented to the Parliament and the Council—composed of relevant ministers of member governments, initially for evaluation and comment then subsequently for approval or rejection.European Firearms Pass
The European Firearms Pass (EFP) is a locally issued firearms licence in a common format that allows citizens of the European Union (EU) to travel with one or more firearm(s) mentioned on the licence from one member state to another. For certain purposes other documentation may be required, depending on the current states' laws and the reason for the movement; a transfer may be temporary (for a competition) or permanent (on a sale). An applicant for an EFP must already hold a licence from the member state in which he/she holds the firearm.Legal Acts of the European Union
Legal Acts of the European Union are laws which are adopted by the Institutions of the European Union in order to exercise the powers given to them by the EU Treaties. They come in five forms: regulations, directives, decisions, recommendations and opinions.Regulations and directives can be either legislative or non-legislative acts. Legislative acts are normally adopted by the Council of the European Union and the European Parliament acting together, and have their legal basis in the treaties. Non-legislative acts are adopted by the European Commission in pursuance with powers given to it by legislative acts. Their function is to fill in the detail omitted by legislative acts.List of European Court of Justice rulings
The following is a list of notable judgments of the European Court of Justice.Primacy of European Union law
The primacy of European Union law (sometimes referred to as supremacy) is an EU law principle that when there is conflict between European law and the law of Member States, European law prevails; the norms of national law have to be set aside. This principle was developed by the European Court of Justice, and, as interpreted by that court, it means that any norms of European law always take precedence over any norms of national law, including the constitutions of member states. Although national courts generally accept the principle in practice, most of them disagree with this extreme interpretation and reserve the right, in principle, to review the constitutionality of European law under national constitutional law.Recommendation (European Union)
A recommendation in the European Union, according to Article 288 of the [Treaty on the Functioning of the European Union] (formerly Article 249 TEC), is one of two kinds of non-legal binding acts cited in the Treaty of Rome.
Recommendations are without legal force but are negotiated and voted on according to the appropriate procedure. Recommendations differ from regulations, directives and decisions, in that they are not binding for Member States. Though without legal force, they do have a political weight. The Recommendation is an instrument of indirect action aiming at preparation of legislation in Member States, differing from the Directive only by the absence of obligatory power.Regulation (EU) 1169/2011
Regulation (EU) 1169/2011 is the main law relating to food labelling in the European Union. There are other EU laws that specify the rules for particular types of foods.
The principles governing mandatory food information is in Article 4, and the list of mandatory particulars in Article 9. Any Union measure in the field of food information law which is likely to have an effect on public health shall be adopted after consultation with the European Food Safety Authority, per Article 5. Further, food information shall not be misleading, per Article 7. Rules on naming food are provided in Article 17.
Article 15 (language requirements) provides that “mandatory food information shall appear in a language easily understood by the consumers of the Member States where a food is marketed. [...] Within their own territory, the Member States in which a food is marketed may stipulate that the particulars shall be given in one or more languages from among the official languages of the Union.”Regulation (European Union)
A regulation is a legal act of the European Union that becomes immediately enforceable as law in all member states simultaneously. Regulations can be distinguished from directives which, at least in principle, need to be transposed into national law. Regulations can be adopted by means of a variety of legislative procedures depending on their subject matter.Relationship between the European Court of Justice and European Court of Human Rights
The relationship between the European Court of Justice (ECJ) and European Court of Human Rights (ECtHR) is an issue in European Union law and human rights law. The ECJ rules on European Union (EU) law while the ECtHR rules on the European Convention on Human Rights (ECHR), which covers the 47 member states of the Council of Europe. Cases cannot be brought in the ECtHR against the European Union, but the Court has ruled that states cannot escape their human rights obligations by saying that they were implementing EU law.Staatenverbund
Staatenverbund is a neologism for a system of multi-level governance in which states work more closely together in a confederation but, unlike a federal state, retain their own sovereignty. The concept is used in Germany to describe the European Union but has no direct equivalent in other languages. In German jurisprudence, a Staatenverbund is a supranational institution that may exercise sovereign acts (laws, coin money, etc.) but may not independently fix areas where it may exercise this power.Subsidiarity
Subsidiarity is a principle of social organization that holds that social and political issues should be dealt with at the most immediate (or local) level that is consistent with their resolution.
Subsidiarity is perhaps presently best known as a general principle of European Union law.Tying (commerce)
Tying (informally, product tying) is the practice of selling one product or service as a mandatory addition to the purchase of a different product or service. In legal terms, a tying sale makes the sale of one good (the tying good) to the de facto customer (or de jure customer) conditional on the purchase of a second distinctive good (the tied good). Tying is often illegal when the products are not naturally related. It is related to but distinct from freebie marketing, a common (and legal) method of giving away (or selling at a substantial discount) one item to ensure a continual flow of sales of another related item.
Some kinds of tying, especially by contract, have historically been regarded as anti-competitive practices. The basic idea is that consumers are harmed by being forced to buy an undesired good (the tied good) in order to purchase a good they actually want (the tying good), and so would prefer that the goods be sold separately. The company doing this bundling may have a significantly large market share so that it may impose the tie on consumers, despite the forces of market competition. The tie may also harm other companies in the market for the tied good, or who sell only single components.
One effect of tying can be that low quality products achieve a higher market share than would otherwise be the case.
Tying may also be a form of price discrimination: people who use more razor blades, for example, pay more than those who just need a one-time shave. Though this may improve overall welfare, by giving more consumers access to the market, such price discrimination can also transfer consumer surpluses to the producer. Tying may also be used with or in place of patents or copyrights to help protect entry into a market, discouraging innovation.
Tying is often used when the supplier makes one product that is critical to many customers. By threatening to withhold that key product unless others are also purchased, the supplier can increase sales of less necessary products.
In the United States, most states have laws against tying, which are enforced by state governments. In addition, the U.S. Department of Justice enforces federal laws against tying through its Antitrust Division.Webster ruling
The Webster ruling is a test case in association football law involving Andy Webster, a defender formerly with Heart of Midlothian football club in Edinburgh, Scotland. In September 2006 he became the first player to exploit the updated transfer regulations of FIFA, football's governing body, which stipulated that players are able to unilaterally walk away from a contract after a fixed period, regardless of the duration of the contract itself. Although the long-term effects of the decision remain unclear, it has been compared to the landmark Bosman ruling of 1995 in its potential significance.