Testimony in the European Court of First Instance Hearing on Microsoft’s appeal of the European Commission’s March 2004 Decision concludes here this afternoon. ECIS has been an Intervener in these proceedings and has given evidence in support of the Commission’s Decision.
Concluding Statement by Thomas Vinje
Legal Counsel, ECIS
“It is no exaggeration to say that the IT industry’s future development depends on the outcome of this case, because it will determine whether the IT industry develops according to the Microsoft model or to a competitive model.
“The facts of Microsoft’s anti-competitive practices are irrefutable, the harm is evident and the law is clear. The Commission Decision of March 2004 seeks to put an end to these practices and set a precedent for the future, because Microsoft’s strategy is replicable. We have been warned :
‘We won the desktop. We won the server. We will win the web. We will move fast, we will get there. We will win the web.’
Microsoft CEO Steve Ballmer
Business Week, 26 September 2005
“Nothing we have heard this week gives the European Court of First Instance reason to overturn the Commission’s Decision. Much of what we have heard from Microsoft this week to justify its practices has been irrelevant, misleading or technically wrong.
“The evidence presented this week by the Commission and its supporters laid bare the predatory character of the monopoly-based Microsoft business model, and its proven methods – tying and non-disclosure of interoperability information.
“95% of the world’s PCs run on the Windows operating system. The power of this networked monopoly allows Microsoft to capture adjacent software markets of strategic value created by the risk-taking innovation of others.
“If this conduct does not constitute the harmful abuse of a dominant position to restrict competition under EU competition rules, what does?”
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 Intervener in these proceedings and is giving evidence in support of the Commission’s Decision.
This morning the Court heard Microsoft’s argument for why the Commission Decision ordering the supply of interoperability information to work group server competitors should be annulled. Microsoft’s presentation purported to show that there is no interoperability problem.
Statement by Thomas Vinje
Legal Counsel, ECIS
“This morning’s Microsoft presentation confirms the March 2004 conclusions of the Commission. Microsoft determines if and how computer server systems will interoperate with Microsoft’s desktop monopoly.
“So long as it is in Microsoft’s business interest, it will provide necessary interoperability information. When it is no longer in Microsoft’s business interest, it ceases to supply this information, interoperability is compromised, and market choice is restricted.”
Work group server operating systems are the software systems enabling office workers in their day-to-day work to communicate with each other via their PCs, as well as to share basic functions such as file and print. They are a key part of an organisation’s information technology infrastructure.
Novell, not Microsoft, created this technology. Other earlier innovators included Sun Microsystems. As the Windows PC operating system spread to some 95% of all PCs worldwide, work group server vendors remained dependent on the willingness of Microsoft to supply the Windows protocol specifications necessary to interoperate with the ubiquitous Windows PC operating system.
However, the Windows desktop monopoly enabled Microsoft to leverage its desktop operating system monopoly to overtake its server system competitors, and to discourage the emergence of new competitors simply by ending the supply of the necessary Windows protocol specifications to its competitors.
In September 1998, Microsoft refused Sun’s request for the necessary protocol specifications. Over the next two years, Microsoft’s share of the market for work group server systems rose dramatically, from the mid 40s to the high 60s. Today it stands at over 70% of worldwide shipments, and continues to move inexorably upward, while all other competitors fight among themselves within the ever-diminishing residual piece of the market.
The European Commission’s Decision of March 2004 found Microsoft’s refusal to supply Sun Microsystems to be an abuse of Microsoft’s dominant position under Article 82 of the European Union’s competition rules, and ordered Microsoft to make the necessary protocol specifications available to any interested party on reasonable, non-discriminatory terms.
Microsoft argues for annulment of this portion of the Commission’s decision because:
- the required information is valuable intellectual property protected by copyrights and patents;
- these protocols specifications reveal valuable innovations and
- there is strong competition in the work group server market.
None of these arguments will stand up to objective scrutiny.
The third day of the full-week European Court of First Instance hearing on Microsoft’s appeal of the European Commission’s March 2004 Decision has concluded here this afternoon. ECIS is an intervener in these proceedings and is giving evidence in support of the Commission’s Decision.
This afternoon the Court heard the European Commission explain its Decision ordering Microsoft to supply the necessary interoperability information for work group server competitors.
Statement by Thomas Vinje
Legal Counsel
ECIS
“The Commission’s testimony this afternoon clearly shows that Microsoft’s share of the market for work group server operating systems is close to 70% and continues to rise, while all other vendors are boxed into a gradually shrinking fringe”.
“Earlier today we heard Microsoft repeat its claims to copyright and patent protection for the interoperability information the Commission Decision requires. But protocol specifications are really just ‘rules of the road’ for connecting two different software products. They have little or no inherent innovative or technological value worthy of intellectual property protection. Microsoft is trying to turn this into an intellectual property case, but it is not.”
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.
STATEMENT BY SIMON AWDE
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.