European Commission attacks Microsoft with antitrust concerns

The Statement of Objections is a formal step in European antitrust proceedings which can indicate the final outcome, but does not prejudge it. The Statement follows an extensive investigation into Microsoft's Windows 2000 operating system which was launched in February 2000.

Microsoft may have an overwhelmingly dominant position in the market for personal computer operating systems and also has a very significant market share in the market for low-end server operating systems. Most PCs today are embedded into networks which are controlled by servers, with interoperability - the ability of the PC to talk to the server - providing the basis for network computing.

To enable alternative server software to interoperate in the prevailing Windows PC and server environment, technical interface information must be known. Without such information, alternative server software would be denied a level playing field, as it would be artificially deprived of the opportunity to compete with Microsoft's products on technical merits alone. The Commission believes that Microsoft may have withheld from vendors of alternative server software key interoperability information that they need to enable their products to “talk” with Microsoft's dominant PC and server software products. Microsoft may have done this through a combination of refusing to reveal the relevant technical information, and by engaging in a policy of discriminatory and selective disclosure on the basis of a "friend-enemy" scheme.

Further, the Commission believes that Microsoft may have reinforced this strategy of extending its dominance from the PC to the server through the operation of an abusive licensing policy for Windows 2000. Under the Microsoft scheme, if customers choose not to use an all-inclusive Microsoft scenario for PCs and servers, but decide to use competing server products, they are forced to bear a double cost. The effect of this policy may be to artificially drive customers towards Microsoft server products, reducing choice to the detriment of the final customer.

Media player

Finally, the Commission also believes that Microsoft may have acted illegally by incorporating its new Media Player product into its Windows PC operating system.

Media players are software products which allow consumers to see and hear audio and video files without lengthy download times on their PCs. These innovative products are developed and manufactured by several companies, including Microsoft itself. However, Microsoft's ties its Media Player to its ubiquitous Windows operating system, a channel of distribution which is not available to competing vendors of media players. Microsoft may thereby deprive PC manufacturers and final users of a free choice over which products they want to have on their PCs, especially as there are no ready technical means to remove or uninstall the Media Player product.

Competing products may therefore be at a disadvantage which is not related to their price or quality. The result is a weakening of effective competition in the market, a reduction of consumer choice, and less innovation.

Mario Monti, Competition Commissioner said:

"Server networks lie at the heart of the future of the Web and every effort must be made to prevent their monopolisation through illegal practices. The Commission also wants to see undistorted competition in the market for media players. These products will not only revolutionise the way people listen to music or watch videos but will also play an important role with a view to making Internet content and electronic commerce more attractive. The Commission is determined to ensure that the Internet remains a competitive marketplace to the benefit of innovation and consumers alike."

Next steps

Microsoft has about two months to reply in writing to the supplementary statement which is now merged with the existing procedure triggered by a Sun Microsystems complaint, which was at the origin of a first statement of objections of 3rd August 2000.

As part of the procedure, Microsoft will have the right to access the file compiled by the Commission and can also request an oral hearing to present its case.

The first statement of objections focused on discriminatory licensing and refusal to supply software information to allow for the interoperability of rival server products with older versions of Microsoft's Windows operating systems.