As the long-awaited decision on Microsoft's appeal of the 2004 antitrust ruling in the European Union was handed down on Monday, headlines used phrases ranging from 'stinging' to 'stunning' to describe the American company's legal defeat.
But with the ruling weighing in at 200-plus pages, we need a 'just-the-FAQs' edition. What happened on Monday, and what does it mean? Some of the answers follow.
What did the EU court do Monday?
The Court of First Instance rejected Microsoft's appeal, and confirmed both of the behaviours the European Union's Competition Commission said were illegal. The first problem, the Commission said in its 2004 judgment, was bundling, or 'tying', Windows Media Player to the operating system. The second - and the issue that has caused virtually all the contention between regulators and Microsoft - is that Microsoft used the dominance of Windows on the desktop to jack up its share of the server software market. The Court said the Commission's moves were correct in both cases.
The Court also reaffirmed the $613m fine the Commission originally slapped on Microsoft, saying that "the Commission did not err in assessing the gravity and duration of the infringement and did not err in setting the amount of the fine".
Who won, who lost?
Although experts and analysts thought last week that it might take days to shake out an answer to those questions, it took just minutes. Microsoft's general counsel, Brad Smith, clearly saw it as a major loss by Microsoft. "The decision is a disappointing one for Microsoft," Smith said in a news conference held shortly after the Court rejected the appeal.
Neelie Kroes, the EU's chief antitrust regulator, saw it the same way. "The Court ruling shows that the Commission was right," she said. "Microsoft must now comply fully with its legal obligations to desist from engaging in anti-competitive conduct."
If you're keeping score at home, it's EU 1, Microsoft 0.
What does this mean for me, Average Windows User?
That's hard to pin down with certainty, but some things seem clearer now. What won't change are the remedies Microsoft's already applied in the EU. The company must continue to sell separate versions of Windows in the EU that have been stripped of Media Player, for example. And it must deliver the protocols necessary for rivals to write server software that works with Windows. Undoubtedly, Monday's ruling will put more pressure on Microsoft to agree to the Commission's demands for more information on the protocols, and to reduce the licensing fees for those protocols.
Down the road, however, changes may continue to be asked of Microsoft, and perhaps other technology companies as well.
Talk of a chilling effect on bundling started to circulate even before Monday's decision, and gathered steam after the fact. "We haven't heard the last of the legal challenges to Microsoft's bundling practices by any means," Herbert Hovenkamp, an expert on antitrust law at the University of Iowa College of Law, told the The New York Times.
In addition, the outstanding complaint made last year by a group backed by IBM might now be shoved to the forefront. The group charged in February 2006 that Microsoft had stymied competition to its Office suite with its proprietary document formats.
Even before the Court's ruling on Monday, however, pressure from rivals had been sufficient to get the company to announce changes to Windows Vista. Although complaints to the Commission last year about Vista's PatchGuard technology did not result in any former action by the EU, it did push Microsoft to promise APIs (application programming interfaces) that will allow security developers limited access to information going into the kernel. And like regulators in the US, the Commission questioned Vista's search features after Google grumbled. In the latter case, Microsoft made concessions that will be implemented in Vista Service Pack 1 (SP1).
Some analysts have also warned that the affirmation by the Court will embolden the Commission to make new charges of market dominance against the likes of Apple or Google, which own the bulk of Europe's digital music and web search business, respectively.
When did this start?
Monday's ruling can be traced back to August 2000, when the European Union's Competition Commission filed its first 'Statement of Objections', or official complaint, against Microsoft. The first of five (so far), that complaint accused Microsoft of withholding technical information that would have let other server operating system developers make their products interoperate with Windows clients. The actual ruling at issue on Monday, however, stems from the decision handed down on March 24, 2004, when the Commission ordered Microsoft to pay a $613m fine, sell a version of Windows without Media Player and provide rivals with the information they needed to make their server software run more smoothly with Windows.
How long has the Court had this case?
The day the Commission announced its ruling and fine, Microsoft said it would ask the Court to stay some of the Commissions sanctions pending an appeal. "I do expect that we'll ask the court to suspend the part of the order that would require us to produce a second version of Windows that has the Media Player code stripped out of it," Microsoft's general counsel Brad Smith said at the time.
It wasn't until June 7, 2004, however, that Microsoft filed its appeal with the Court, and nearly three weeks later - June 27 - that it officially asked the Court to suspend the Commission's orders pending appeal.
The Court held two days of hearings on the stay request on September 30 and October 1, 2004. A little less than three months later - on December 22 - the Court ruled against Microsoft, telling it to toe the Commission's line, appeal notwithstanding. Microsoft had not proved that complying with the sanctions would cause "serious and irreparable harm" to its business, the court said.
During a week-long session from April 24 to 28, 2006, the Court of First Instance listened to arguments from lawyers representing both Microsoft and the Commission. Then, on July 17, the Court announced it would issue its decision on Monday, September 17.
Will this be the end of it?
Either party can appeal to the European Court of Justice, the EU's highest court, but only on orders of law. Microsoft has not yet said whether it will file such an appeal. "We just need to think about this," said Smith said Monday. "It's a serious and substantial decision and it deserves serious thought rather than an instantaneous decision."
Smith was anything but confrontational in his news conference minutes after the decision. "We are 100 percent committed to complying with every aspect of the Commission's decision," he said. How that happens, however, particularly with regard to the protocols that Microsoft must offer rivals, is still somewhat up in the air.
During his news conference, Smith noted that there were "a couple of issues that need to be sorted out," and listed them as the licensing pricing and the protection of trade secrets. Microsoft and the Commission have butted heads repeatedly over the protocols, resulting in additional fines levied by the antitrust regulators.
What's this I heard about US Congress jumping into the fray?
You heard right. Hours after the Court issued its decision, Rep. Robert Wexler, (D-Fla.), announced that he would hold a hearing in the subcommittee he chairs in the House Committee of Foreign Affairs on the ruling. "The European Court decision today sets a dangerous precedent and will have a dramatic impact on US-EU economic relations," Wexler said. "I am concerned that American high tech companies, including Microsoft, are being unfairly targeted by zealous European Commission regulators."
Who might be next on the Commission's list?
Apple. On Wednesday and Thursday, the Commission will hold hearings into iTunes' pricing. This is the follow-up to the Commission's April accusations, when it said Apple and the four biggest record labels charged customers in different EU countries different prices for digital music.