EU ruling vital to content sector

This week’s European Court decision on Microsoft’s alleged monopolistic behaviour will have a profound effect on the emerging market for next-generation internet content.

In 2004, the Commission fined the Redmond-based company €497m (£341m) for abusing its market position.

There were two charges: that the firm had deliberately restricted the interoperability between Windows PCs and non-Microsoft servers; and that it was bundling the Windows Media Player with its operating system to try to quash competition from Real Networks.

The ruling is a test case about what software companies must share with competitors, said Michael Grenfell, a partner at law firm Norton Rose.

At its heart is the need to ensure small innovators are not scared out of the market by the unassailable dominance of the likes of Microsoft, he said.

The danger is that the development of the emerging broadband media content sector will be inhibited, slowing progress and stopping economic growth.

“Without ensuring those who innovate can reap the benefit, there is no incentive to innovate,” said Grenfell.

In 2000, the Commission concluded that bundling Windows Media Player with the Microsoft operating system artificially reduced the incentives for developers and content providers to ensure compatibility with competing software.

It has been an effective tactic for Microsoft in the past. Microsoft faced questions from the US regulator in 1998 for bundling its Internet Explorer browser at the expense of rival Netscape.

Microsoft held its ground and Netscape is no longer a threat to its browser business.

Another win by Microsoft in the EU case would open the door for it to use the same tactics in other areas, say experts. A tempting target could be the security sector, challenging the likes of Symantec and McAfee, according to Ovum principal analyst David Bradshaw.

The legal challenge is to agree on a clear definition of abuse of market power, said Denis Waelbroeck, partner at law firm Ashurst.

“It is normal for competitors to compete and not help each other, otherwise you have a cartel, so it can be an obscure and confusing area of the law,” he said.

1998
Sun Microsystems complains that Microsoft is refusing to provide Windows interface information. The Commission investigation reveals non-disclosure to be part of a broader strategy to shut out competitors.

2000
Commission investigations are widened to include the bundling of
Windows Media Player with the Windows operating system.

2004
Microsoft is ordered to pay €497m (£341m), divulge server interoperability data within 120 days, and produce a version of Windows that does not contain Windows Media Player within 90 days.

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