Ruling in European Microsoft Antitrust Case Due This Week

For Microsoft, Christmas might come early this week — or the ghosts of market dominance past might come back to haunt the software giant — as a key court ruling is expected Wednesday that will determine whether the penalties assessed by European regulators are set aside while a trial unfolds in coming months and years.

European Union (EU) officials have said that a decision will be made public Wednesday from the EU’s second-highest court on whether the penalties assessed against Microsoft — including the largest antitrust fine ever levied by the European Commission and the requirement that Microsoft share its server source code with rivals — should be stayed pending a full trial.

Long Trial

The ruling stems from two days of hearings held this fall in which Microsoft argued that the sanctions, which also require Microsoft to make and ship a customized version of Windows that strips out Media Player, should be shelved until a trial is held.

Many observers, mindful of the epic antitrust proceedings in the U.S., say that such a trial could take anywhere from two to five years.

Whatever the decision, either side will have the right to appeal to the European Court of Justice, the highest court in the union, meaning it could be several more months before the full antitrust trial even gets under way.

There are a range of scenarios that could unfold after Wednesday. The judge could grant a stay on only some remedies, or freeze them all. Either side might immediately ask for an appeal of the grant decision.

Analysts say the decision might be important for giving a glimpse into how part of the court views the commission’s original decision. If the judge shows uneasiness about the scope of the ruling, it could prompt the commission to ask Microsoft to negotiate a less stringent outcome. On the other hand, if the judge strongly backs the decision, it could prompt Microsoft to ask for settlement talks to be reopened. The talks failed earlier this year after Microsoft CEO Steve Ballmer flew to Europe to shepherd the negotiations.

Source Code

“There are clearly specific elements to the original ruling that they find impossible to agree to,” Yankee Group analyst Laura DiDio said. Speculation has been that the removal of Media Player from Windows is one of those sticking points, particularly since Microsoft is hard at work on a next-generation version of the platform that more tightly integrates that software.

Opening its source code up to rivals is also something Microsoft is likely to fight tooth and nail. DiDio noted that Microsoft argued strongly on that front in the two-day hearing on lifting the penalties temporarily, arguing that once it’s shared, it cannot be taken back should Microsoft prevail in a trial.

When it was handed down, the EU ruling was seen as a major win for RealNetworks and Microsoft’s rivals in the server market. However, since then, many analysts have questioned whether even if all the penalties were enforced — an unlikely scenario by most accounts — the competitive landscape in Europe might not be altered significantly.

One potential reason for optimism for Microsoft is the fact that several of its most ardent critics withdrew their objections in the European proceedings. In November, Microsoft struck a deal with Novell to settle private antitrust proceedings and forged a separate agreement with a leading industry group, the Computer and Communications Industry Association (CCIA).

Approach to Competitors

Still, most analysts expect at least some of the European sanctions to stand in the end or for an agreement that is palpable to all sides to be reached.

“Microsoft has worked very hard in the past couple years to turn litigants into allies whenever possible,” said Forrester Research analyst Paul Jackson, citing the Sun Microsystems and Novell settlements.

While that approach is often more difficult when dealing with the political realm, reducing the number of competitors and industry groups calling for stiff sanctions could help in the long run, he added.

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