ECIS Media Release – Day 2 of the Microsoft Oral Hearing in Luxembourg

The European Court of First Instance Hearing on Microsoft’s appeal of the European Commission’s March 2004 Decision continued this morning. ECIS is an Interested Party in these proceedings and is giving evidence in support of the Commission’s Decision.

This morning, the Court questioned the parties concerning the Commission’s finding that Microsoft has illegally tied its Windows Media Player to its monopoly Windows PC client operating system. All parties had the opportunity to respond. This concludes the portion of the Hearing on tying and bundling of the Windows Media Player. There is no afternoon session today.

Chairman, ECIS

“Nothing we have heard over the past two days changes the basic facts of the tying case. Windows Media Player and Windows are separate products. Microsoft intentionally foreclosed competition in the media player market by tying these two separate products together. Microsoft’s assertions of strong new competition for media streaming are self-serving and misleading.”

  • Microsoft says Windows Media Player is not a separate product but rather an integral part of the Windows operating system.

This is demonstrably false. In response to a Court question this morning, Microsoft itself admitted that it indeed could have developed Windows Media Player as a stand alone product, and in fact continues to offer it as a stand alone product. This can be seen on Microsoft’s own website, where Windows Media Player 9 is offered to users of Mac 0S X (see below, Annex I), with no need to download any part of the Windows operating system to make it work.

More fundamentally, regulatory endorsement of Microsoft’s ‘one product’ logic would mean that there is no longer any such thing as ‘application’ software, only ‘functionality’ waiting to be embedded in operating system platforms. This is patently absurd. The entire software industry is built around applications designed to run on operating system platforms.

Microsoft is really saying that they reserve the right to tie any application to their Windows operating system monopoly platform when it suits their strategic interest, and thereafter declare it an inextricable part of the platform. As history shows, this behavior is invariably intended to restrict competition in the targeted applications market, not to enhance technical efficiencies or user benefits.

  • Microsoft says tying applications to its monopoly Windows operating system is only ‘improving’ Windows, the way an auto maker adds air bags or other features.

The auto-maker analogy holds no water. There are many competing auto makers with many different air bag systems. There is only one super-dominant PC operating system able to eliminate competition in adjacent markets at will through ‘improvements.’

  • Microsoft says the Commission’s charge of market foreclosure is speculative and theoretical.

There is absolutely nothing speculative or theoretical about the market foreclosure effects produced by the tying of Windows Media Player to Windows in 1999.

Microsoft specifically intended to foreclose competition, their internal correspondence shows that they foresaw it, and indeed it had happened by the time of the Commission’s Decision. Until mid-1999, RealPlayer had many times more users than Windows Media Player, which was losing ground. Since the tie, 100% of Windows PCs, which make up 96% of all PC shipments worldwide, contain Windows Media Player, with the result that RealPlayer is no longer a competitive force.

  • Microsoft says there is strong competition in the media player market.

We have heard this argument before. Microsoft always claims to face strong competition when confronted by competition authorities, as it did during the US legal proceeding when AOL acquired Netscape. But by then Netscape had already lost the battle with Microsoft’s Internet Explorer after it had been tied to the Windows monopoly.

Today Microsoft points to iTunes, Flash and other new technologies as proof that competition in the media streaming market is not foreclosed, even though these products do not compete directly with Windows Media Player. The direct and dangerous competitor to Windows Media Player was RealPlayer, which has been deliberately and successfully marginalized by the Windows Media Player tie to Windows.

Statistics presented by Microsoft during the hearing which purport to show widespread availability of competing media players on PCs are of dubious quality. This data is propriety to Microsoft and unverified by any third party, or for that matter by the European Commission or the European Court of First Instance. Conflicting data submitted by the Commission and its supporters including ECIS is uniformly from published, recognized third party authorities.