The EU Microsoft Decision

1. The EU Microsoft Decision Aryeh Friedman AT&T Corp

2. Article 82 • Hoffman-La Roche, Case 85/76,[1979] E.C.R. ¶ 91: Defined abusive exploitation of a dominant position as “recourse to methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.”

3. Background MS Server 0/S Desktop Client O/S w/ WMP Competing Server O/S Desktop Client O/S w/ WMP

4. Monopoly Leveraging/Duty to Disclose • Leveraging from the PC client operating system market to the work group server operating system market. Does network effects make leveraging argument more compelling? • Leveraging by withholding technical information on interoperability from server competitors. Affects client/server inter-operability and server/server interoperability. • Commission stated that this conduct “has enabled Microsoft to acquire a dominant position in the market for work group server operating systems.” Servers as future competitive platform to OS platform?

5. Tetra Pak (II) monopoly leveraging by, inter alia, non-disclosure of specifications needed for interoperability an abuse of dominance under Article 82. Trinko and scope of right of refusal to deal. U.S. v. Microsoft: MS’s version of Java, even though developed to be incompatible with rivals, not a violation. 253 F.3d at 75. FTC consent decree with Intel – Intel not to w/hold info to companies seeking to protect IP rights. E.U. v. U.S. Law: Leveraging and Duty to Disclose

6. Bundling of WMP and O/S • Illegal bundling of the Windows Media Player (for streaming media) with the client O/S system. • Note RealNetworks current antitrust suit against Microsoft. • Effects: Significantly weakened competition in the media player market (but no claim of dominance in that market): “artificially reduces the incentives of … content providers to develop their offerings to competing media players.” • “Tipping” “would allow Microsoft to control related markets in the digital media sector.”

7. Q’s and A’s cited Tetra Pak (contractual tying of non-aseptic machines and cartons held illegal as abuse of its dominant position) and Hilti (nail guns, cartridge strips and nails). Applied rule of reason. U.S. v. Microsoft: Tying browser to operating system Technological v. contractual integration Remanded under rule of reason. Court of Appeals noted failure to define browser market or show a dangerous probability of monopolizing that market. E.U. v. U.S. Law: Bundling/Tying

8. Remedies • Fines: Commission can impose fines from € 1K to 1M, but not exceeding 10% turnover in the preceding year; fine here was € 497.2 ($613 million) • Interoperability: W/in 120 days, MS must disclose interface documentation which would allow non-MS servers to interoperate with MS client OS and servers, subject to reasonable remuneration (supervised by Trustee). • Tying: W/in 90 days. MS must offer to PC manufacturers client O/S system w/out WMP

9. Regulation 17, art. 3: Conduct (no structural) remedies and fines Compulsory licensing. Magill, but see, NDC Health v. IMS U.S. v. Microsoft: Lower court proposed structural (note court of appeals concerns) and conduct remedies U.S. settlement allows WMP to be hidden but not removed (Were the remedies in the consent decree effective?) E.U. v. U.S. Law: Remedies