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The European Commission sent a statement of objections to Microsoft last Thursday. The statement of objections 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 statement of objections, 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 statement of objections is based on the legal and economic principles established in the judgment of the Court of First Instance in September 2007 (case T-201/04), in which the Court of First Instance upheld the Commission's decision of March 2004 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.
The evidence gathered during the investigation led the Commission to believe that the tying of Internet Explorer with Windows, which makes Internet Explorer available on 90 percent 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 that other Web browsers are unable to match.
The Commission said it was 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 that consumers ultimately obtain.
In addition, the Commission said it was concerned 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 to the Statement of Objections, 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 statement of objections 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.
A statement of objections is a formal step in Commission antitrust investigations in which the Commission informs the parties concerned in writing of the objections raised against them. The addressee of a statement of objections can reply in writing to the statement of objections, setting out all facts that are relevant to its defense against the objections raised by the Commission. The party may also request an oral hearing to present its comments on the case.
The Commission may then make a decision on whether conduct addressed in the statement of objections is compatible with the EC Treaty's antitrust rules. Sending a statement of objections does not prejudge the final outcome of the procedure.
In its March 2004 decision, the Commission imposed remedies, as regards to interoperability. Microsoft was required to disclose complete and accurate interface documentation, which allowed non-Microsoft work-group servers to achieve full interoperability with Windows PCs and servers. This was supposed to enable rival vendors to develop products that can compete on a level playing field in the work-group server-operating-system market. In the March 2004 decision, Microsoft was entitled to reasonable remuneration, to the extent that any of this interface information might be protected by intellectual property in the European economic area.
As regards to tying, the March 2004 decision required Microsoft to offer to PC manufacturers a version of its Windows client PC operating system without WMP. The un-tying remedy did not mean that consumers obtained PCs and operating systems without media players. Most consumers purchase a PC from a PC manufacturer that has already put together on their behalf a bundle of an operating system and a media player. As a result of the Commission's remedy, the configuration of such bundles reflected was what consumers wanted, and not what Microsoft imposed.
Ari Syrquin is the head of the international department at GSCB Law Firm.