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The Honolulu Advertiser
Posted on: Tuesday, September 18, 2007

EU ruling against Microsoft sets tougher rules overseas

By Christopher S. Rugaber
Associated Press

Hawaii news photo - The Honolulu Advertiser

Microsoft lawyer Brad Smith discusses the European Union court judgment at a press conference in Brussels, Belgium. The court rejected Microsoft’s appeal of a landmark antitrust ruling yesterday.

VIRGINIA MAYO | Associated Press

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WASHINGTON — A European Union appeals court's decision to uphold a 2004 antitrust order against Microsoft Corp. means that U.S.-based multinationals will continue to face tougher competition rules in Europe than at home, legal experts said.

Many U.S. companies hoped that the EU's Court of First Instance would take steps to restrain the European Commission. The case is one of the first opportunities for the courts to interpret the EU's antitrust laws.

Instead, Microsoft yesterday lost its appeal of a European antitrust order that obliges the technology giant to pay a $613 million fine, share communications code with rivals and sell a copy of Windows without Media Player. The EU Court agreed that Microsoft abused its monopoly in trying to muscle into server software.

The decision likely cements Europe's role as the lead international regulator of dominant companies, said M.J. Moltenbray, a partner at Freshfields Bruckhaus Deringer LLP.

"In global markets, the antitrust policy that matters is the most restrictive one," she said.

The ruling could also make Europe's antitrust regime more attractive to developing countries such as China and India, which are just beginning to implement competition laws, Moltenbray said.

Both the United States and EU have sought to influence developing countries' legal systems, Moltenbray said, but the Microsoft ruling shows that the European model allows greater government intervention in the market, which many countries may prefer.

Carole Handler, a Los Angeles-based attorney at Foley & Lardner LLP, said the ruling "just crystallizes the incredible difference between the antitrust philosophies of the EU and the United States."

A group of U.S. software companies, including Oracle Corp., Novell Inc. and Sun Microsystems Inc., applauded the ruling.

The international scope of the EU's role was reflected in the Microsoft case in that it was Sun, a U.S.-based multinational, rather than a European company, that brought the initial complaint in Europe.

"Microsoft's rivals ... haven't been able to get the constraints they wanted out of U.S. courts, so they're trying to get them out of the European Union," Keith Hylton, a professor at Boston University School of Law, said Friday.

The EU court's decision is unlikely to have a direct impact on Microsoft's antitrust case in the United States, Moltenbray and Hylton said. The Justice Department's case against the software company is narrower and unlike the EU's ruling, doesn't bar bundling applications such as Windows Media Player.

THE RULING: Microsoft Corp. lost an appeal at the European Union's Court of First Instance to get a landmark 2004 antitrust ruling and record 497 million euro ($613 million) fine overturned.

WHAT IT MEANS: The EU court's dismissal of the appeal forces Microsoft to comply with the 2004 order by EU competition regulators. It must share code with rivals and sell copies of Windows without Media Player, a move the EU argues will give consumers more choice.

WHAT NEXT: Microsoft lawyers said they need to study the 248-page ruling before they decide on the next legal move. They have a right to appeal to the EU's highest court, a process that could take months if not years. In the meantime, Microsoft officials said they will aim to heal relations with the EU and admitted the company may need to do more to comply with EU demands.