No one survives the European Inquisition
Sorry to bastardize a line from Monty Python. But there's no way to sugar-coat it; MSFT got clocked in Europe today. That was a loss of staggering proportions. Where most had expected a split-decision - myself included, the Court of First Instance upheld virtually the entire EU Commission case:
The Court of First Instance essentially upholds the Commission's decision finding that Microsoft abused its dominant position," a court statement said.
As a result, the judgments on both bundling and interoperability information stand. As does the record fine. MSFT even gets to pick up 80% of the EUC's legal costs and that of several competitive rivals - or at least rival-backed lobbying groups (EUC picks up 20% of MSFT's costs). What I haven't seen covered is whether this is likely to open the floodgates to additional litigation/financial settlements with competitors in Europe (as it did in the US following the Final Judgment).
Caveat: I haven't read the detail of the Court's decision. Supposedly, MSFT will be still be allowed to improve its products. But when the court found no technical advantage to bundling Media player the way they did, you have to wonder how high the bar will be to add anything without a major fight from a further emboldened EUC. And make no mistake, they are that:
“The ruling confirms more than ever that Microsoft must comply,” said EU Competition Commissioner Neelie Kroes. “I will not tolerate continued noncompliance.”
Additionally, chances that Office and Vista - both of which are under investigation - will now be subject to further EUC demands and or charges seems like a foregone conclusion.
As readers know, I personally thought the European case was far weaker than the US one. Nevertheless, MSFT's legal team went down to total defeat. While they can still appeal to Europe's highest court, that is now restricted to much narrower rules of law only. It's TBD whether they will do so. If they're smart they won't. Which of course means...
Here's the current party line:
“I don’t want to talk about what will come next,” said Microsoft lawyer Brad Smith. “We need to read the ruling before we make any decision.”
EUC head Neelie Kroes is quoted as saying that her view of "success" [now] would be for MSFT's European marketshare to eventually drop to 50% or so. An aide later felt compelled to add that she meant "as a result of normal competitive forces". Sure.
Meanwhile, the stock is off $0.37 or 1.27% on decent but not spectacular volume (presently). The market appears to be trying to decide if this is at least short-term resolution - which they like, versus the beginning of the end for MSFT's dominant market position in Europe - which of course they don't like. Unless the US Administration brings some persuasion to bear to keep the EUC in check, MSFT - and possibly other dominant companies - are going to find it even tougher doing business in Europe. Oh well, at least we got that $0.10 dividend last week. Did you even have a chance to spend it yet?
Thomas Barnett, head of the Justice Department's Antitrust Division, said the European Court of First Instance (CFI) in the case against the US software giant may do more harm rather good for consumers.
"Rather than helping consumers, (the decision) may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition," the US official said in a strong rebuke of the EU action.
Barnett said that in the United States, "the antitrust laws are enforced to protect consumers by protecting competition, not competitors" and that barring "demonstrable consumer harm, all companies, including dominant firms, are encouraged to compete vigorously."
Update #2 (9/19/07):
Joe Wilcox adds his two cent's worth on the potential implications of this ruling:
What the European Commission wants is the breakup of Microsoft without severing the business asunder.
Gives you the basic tone, if you want to save yourself the effort.
Paul Thurrott links to an interesting piece re: potential impact of this judgment for AAPL:
Update #3 (9/20/97)
Last one, I promise: