January 27, 2004 10:21 AM PST

EU seen ruling against Microsoft

Just one day after Microsoft Chairman Bill Gates picked up an honorary knighthood, it looks like a European Union antitrust investigation into the software company is set to rule against Redmond's finest.

While the ruling is still in its draft phase, and details of any final decision are yet to be made public, all the signs are that it won't be going Microsoft's way. The EU's Competition Commissioner, Mario Monti, has been touting the draft resolution over the Windows Media Player dispute around various departments in the European Commission--which EU commentators believe rarely happens in cases where antitrust cases go in the company's favor.

While the prospect of Microsoft getting a legal kicking might not cause many tears outside Redmond, Wash., the software company could well be a pawn in a larger political battle. Trans-Atlantic tensions may be affecting Microsoft's treatment at the hands of the EU, according to James Governor, principal analyst at Red Monk.

"The unilateralism of the U.S. will make it harder for the EU to make a sensible judgement. Whatever happens, there will be a lobby in America that will turn around and say Europe is just trying to protect itself, they're afraid of competition and it's an attempt to block Microsoft from succeeding," he told Silicon.com. "The situation is exacerbated by the U.S. political situation. The problematic trans-Atlantic relationship is why the EC has worked so hard not to mess it up."

The final ruling will no doubt come as a blow to Microsoft, already in the middle of legal wrangling on the other side of the Atlantic with U.S. authorities over whether it has broken its antitrust agreement. It's thought that should the European decision go against Microsoft, the penalties for breaking competition regulations could include a fine of up to 3 billion euros ($3.7 billion), as well as strict edicts designed to alter the way Microsoft sells its products.

Neil Warick, EU and competition partner at law firm Dickinson Dees, said he believes that a fine is probable. "A fine is more likely than a behavioral order," he told Silicon.com. "It's common sense--the commission is understaffed and they don't have the spare bodies to police an order," he said, adding that Microsoft shouldn't expect an easy ride from the European commission. "The U.S. legal system is more about plea-bargaining and finding a solution," he said. "In Europe, it's not about finding a remedy, it's about punishing them."

But Governor wouldn't be surprised if the EU didn't levy some fine but said he thinks there will be more to any judgment, adding he expects to see an interoperability angle in any settlement.

"Don't expect a quick decision" seems to be the message from the legal fraternity--the investigation itself has already lasted more than three years and the case is unlikely to come to a conclusion without an appeal from the Gates camp, which has the potential to drag it out for several years to come. The case even has the potential to go on for a decade, Warick said.

Even then, the legal battle for Microsoft might well take a different tack. Once the EU battle is over, it's possible for individual European countries to pursue their own antitrust suits against the company.

Silicon.com's Jo Best reported from London.

 

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