LUXEMBOURG - The European Commission's authority over monopoly abuse hangs in the balance as the wait begins for a court decision on whether to back a ruling that would force Microsoft to change its business model.
After years of investigation, the Commission found in 2004 that the world's largest software maker abused the dominance of its Windows operating system -- used by 95 percent of the world's personal computers -- to elbow out rivals.
The Court of First Instance, Europe's second-highest court, conducted hearings last week to decide whether the Commission was right or its decision had errors. The court will also decide whether to uphold a record fine against the U.S. company of 497 million euros ($623.6 million).
From the beginning, the Commission has said the decision is necessary to prevent continued abuses.
Former Competition Commissioner Mario Monti said in 2004 it was "essential to have a precedent which will establish clear principles for the future conduct of a company with such a strong dominant position in the market".
Competition Commissioner Neelie Kroes is vigorously following Monti's approach, but a defeat would probably force her to shelve the case, which could only be reopened if a higher court were to rule in the commission's favour. The Monti precedent would be demolished.
A lawyer who sat through the hearings last week, but asked not to be identified, put it this way:
"If the Commission loses, it will be neutered."
Bureaucrats Overlooking Microsoft
For Microsoft, the ruling by a special 13-judge panel will test whether the software giant can design software without bureaucrats always looking over its shoulder.
"I think it's important to everybody", for Microsoft to win, while innovation and "the importance of intellectual property rights around the world" are at stake, said Brad Smith, the company's general counsel, last week.
Smith offered no predictions of the outcome.
The Commission has already made disgruntled noises about Microsoft's Vista, a new version of Windows due out next year.
Kroes wrote to Microsoft Chief Executive Steve Ballmer in March to ask for information about Vista, which could affect functions that are currently provided as separate applications by companies such as Google and Adobe.
But Microsoft has experienced other adverse rulings without altering its business model. Governments in America and Asia have also ruled against the software giant.
The United States Court of Appeals ruled in 2001 that Microsoft violated the Sherman Act prohibition on "monopolization" by crippling the Netscape Web browser. By the time the ruling came out, Netscape had already sold out.
In December, the South Korea Fair Trade commission ordered Microsoft to separate its instant messaging service from Windows. Japan has also found against Microsoft.
Rulings against Microsoft have not yet changed its behaviour while the company has appealed them. The Commission is considering whether to impose a fine of up to 2 million euros a day, because Microsoft has dragged its feet on carrying out the 2004 decision.
Judge John Cooke, who will write a draft decision in the Brussels case for his fellow judges, raised that issue during the last day of the week-long hearings.
"Isn't the reason we're all here today is that Microsoft refused to do what the Commission wants it to do?" Cooke asked.
Microsoft lawyer Ian Forrester said that Microsoft did not want to unjustifiably give up the fruits of its work by disclosing trade secrets.
Cooke pressed the company about its "stubborn unwillingness" to comply with the Commission and said that it was "not a matter ... for us to decide if it's a justified unwillingness".
Judges at the court often test and probe in an effort to understand arguments, and it can be misleading to jump to any conclusions about their views of the case.
Some of Cooke's questions gave a nod to the Commission's views, but others gave a nod to Microsoft.
Cooke's questions and extensive written arguments will help the court decide whether the Commission's ruling and its remedies are right.
The Commission found that Microsoft behaved illegally when it bundled its own media player into Windows, at a time when the top media player provider was RealNetworks, which left customers no incentives to buy other player applications.
It ordered the company to sell a version of windows without its Windows Media Player.
The Commission also found Microsoft withheld information from rival makers of work group servers, which let desktop users sign on to a network, access files and print documents, so that they could not compete.
It ordered Microsoft to give other companies information so their servers could hook up and run as smoothly as those of Microsoft.
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