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9/17/2007
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Microsoft's EU Loss May Set Precedent For Intel, Apple, Others

The outcome of the case could force players like Intel, Apple, and others to share or open their technology to outsiders.

Though Microsoft lost an appeal on European Commission antitrust claims Monday, the approximately $1 billion fine for which Microsoft remains liable doesn't close the issue, either for Microsoft or the rest of the technology industry. The outcome of the case could influence the very nature of competition among the dominant players in the technology industry, forcing players like Intel, Apple, and others to share or open their technology to outsiders or refrain from certain competitive practices.

Several looming European cases may now draw from the decision on Microsoft. The same section of the treaty that got Microsoft into trouble, a section that talks about "abuse of a dominant position within the common market," also spurred on-going formal probes of both Intel and memory chipmaker Rambus.

Meanwhile, the European Union will hold antitrust hearings later this week to investigate whether Apple and major record labels are engaging in unfair pricing practices for digital media. That concern arises partially out of Apple's dominance in digital media sales, where some have complained that Apple creates its own vendor lock-in by not allowing any other media devices but the iPod to work with iTunes. And European competitors have alleged Qualcomm is overcharging for patent royalties on mobile technology, spurring a potential EU probe. Even Microsoft is subject to another complaint from rivals that Office 2007 and Windows Vista create some sort of lock-in.

"At long last, this decision opens the prospect for dynamic competition in the software industry," said Thomas Vinje, legal counsel for the European Committee on Interoperable Systems, which has represented the interests of Microsoft competitors such as IBM in this case. "No more user lock-in, no more monopoly pricing." If Microsoft stops bundling new capabilities with Windows, the thought goes, consumers and businesses will have more choice and have to pay Microsoft less.

The European Commission seems to want even more, as a matter of principle against monopolies. "A significant drop in market share is what we would like to see," European Competition Commissioner Neelie Kroes said at a news conference Monday. "When we observe a situation where one producer has a share of 95% of the market, it's a monopoly. It's not just a monopoly-like situation."

In response to a question from a reporter, Microsoft general counsel Brad Smith bristled at Kroes' words. "These are rules that speak more to how one competes more than who should win the race," he said. "The decision very clearly gives the commission broad power and very broad discretion. There are many companies in our industry that have very large market share." He pointed to Apple in digital media, Google in search, and IBM in mainframe computers, suggesting that any one of them could become targets of the EU with this ruling.

Opponents say Microsoft is just crying wolf. "Immediately what Microsoft has always said is, this isn't always about us, this is about all software companies' ability to innovate," says Ken Wasch, president of the Software & Information Industry Association, the largest trade association in the software industry, which has filed briefs against Microsoft in both the earlier Department of Justice anti-trade case and in this case. "Last I checked I wasn't locked into the Google search engine."

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