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other operating systems such as: (i) higher-level connections: for full interoperability with the PC
ANTITRUST
operating systems, which support mission/busi- to be achieved in this context, server-to-server
ness-critical applications; or (ii) ‘edge’ server connections are indispensable. As a result, the
operating systems, such as firewall or web server refusal, although it involves both client-to-server
operating systems. As regards supply side and server-to-server connections that relate to the
substitutability, although different server oper- interoperation within Windows work group
ating systems within a given product range are networks, is in its essence a denial of compatibility
generally built on a common ‘code base’, each with Windows PCs to competing work group
server operating system within this product range server operating systems.
needs to be optimised according to the tasks that it
is designed to fulfil, and this requires a specific Although undertakings are as a rule free to choose
development and testing process. This process their business partners, it is established case-law
involves significant time and costs. Supply side that a refusal to supply may in certain circum-
substitutability from other markets does not there- stances constitute an abuse of a dominant position,
fore represent an appreciable competitive unless it is objectively justified. In the present
constraint in the market for work group server case, the Commission has identified the following
operating systems. The Decision also identifies exceptional circumstances of Microsoft's refusal.
significant barriers to entry in the work group
server operating system market, in particular due First and foremost, Microsoft's refusal risks elimi-
to the presence of network effects in that market. nating competition in the work group server oper-
ating system market. This is borne out by the
Sun supplied evidence that it had requested tech- evolution of Microsoft's market power in that
nical information on how Windows work group market, where the Decision establishes that
servers interoperate with Windows PCs in order to Microsoft has actually already attained a dominant
adapt its own work group server operating system position and that its market shares continue to
offering to compete with Microsoft's, and that it grow. The Commission collected a very signifi-
had not been provided that information. Microsoft cant amount of customer evidence showing that it
acknowledged during the course of the investiga- is the ‘interoperability advantage’ that Microsoft
tion that it was not prepared to provide the infor- reserves to its product via its refusal to supply
mation requested by Sun to Sun or any other work interoperability information that drives customers
group server operating system vendor. Indeed, towards Microsoft's work group server operating
many work group server operating system vendors system products. This is confirmed by customer
confirmed to the Commission that they had diffi- data provided by Microsoft itself. The Decision
culties in building products compatible with the establishes that the interoperability information is
architecture of Windows work group networks indispensable to be able to viably compete in the
(PCs + work group servers). The Commission work group server operating system market. In
therefore concluded that Microsoft had engaged in particular, the Commission extensively analysed
a general pattern of conduct of withholding actual and potential substitutes to the
interoperability information from its competitors. interoperability information which Microsoft had
The Commission also identified that similar infor- argued were effective, and concluded that they
mation had been previously provided to the were technically or commercially unrealistic. It is
industry at large — through disclosure to AT&T also noteworthy that, due to the presence of signif-
— and that with Windows 2000, Microsoft icant barriers to entry in the work group server
disrupted this previous level of supply. operating system market, an elimination of compe-
It must be underlined that the information at issue tition would be difficult to reverse.
consists of the rules of connection between soft-
ware elements in an IT network. The legally rele- Second, Microsoft's refusal limits technical devel-
vant refusal is not a refusal to supply the Windows opment in the impacted market to the prejudice of
source code, which constitutes the core of consumers. If competitors had access to the
Microsoft's products. Microsoft is able to docu- refused interoperability information, they would
ment the information at issue in the form of inter- be able to provide new and enhanced products to
face specifications and thereby supply this infor- the consumer. Market evidence shows that
mation without having to disclose source code. consumers value product characteristics such as
security and reliability, although those characteris-
It is also noteworthy that the relevant information tics are relegated to a secondary position due to
relates to the organisation of Windows work group Microsoft's interoperability advantage.
networks, which is based on an architecture of Microsoft's refusal thereby indirectly harms
interrelated PC-to-server and server-to-server consumers.
Microsoft's justification was that the information time, there remains today separate consumer
at stake was protected by intellectual property demand for stand-alone media players, distin-
rights. The Commission did not take a position on guishable from demand for PC operating systems;
the validity of Microsoft's general intellectual (ii) a number of vendors develop and supply media
property claims, which could in any case only be players on a stand-alone basis; and (iii) Microsoft
ascertained on a case by case basis when Microsoft itself develops and distributes versions of its
has prepared the relevant specifications. Windows Media Player for other PC operating
systems.
An undertaking's interest in exercising its intellec-
tual property rights cannot as such constitute an The Commission also concluded that Microsoft
objective justification when exceptional circum- afforded consumers no choice to obtain Windows
stances such as the ones identified above are estab- without Windows Media Player; Windows Media
lished. However, the Commission did not a limine Player is always present on a Windows PC. Even
reject Microsoft's proffered justification, and though the icon can be hidden, the product itself
addressed the impact on Microsoft's incentives to cannot be removed and the code remains instantly
innovate of an obligation to supply in this case. accessible on a user's PC (this is important for the
First, the Commission concluded that an order to subsequent harm to competition analysis). The
supply the relevant information could not lead to issue of whether or not consumers are obliged to
the cloning of Microsoft's product, not least use Windows Media Player with Windows was
because the interoperability information relates to different to the question of whether they are
interface specifications as opposed to source code. obliged to obtain Windows Media Player with
Second, the Commission took account of the fact Windows. The question of usage of Windows
that disclosure of interoperability information was Media Player as opposed to other media players
commonplace in the industry. Third, the Commis- was nevertheless of key importance when the
sion drew inspiration from the IBM undertaking Commission considered the issue of whether tying
and from the 1991 Software Directive, (1) which harmed competition.
strikes a balance between interoperability and
copyright in restricting in specific circumstances On this point, the Commission took into account
the exercise of copyright over software (including the fact that users can and do also obtain other
exercise by non-dominant undertakings) in favour media players (mainly over the Internet) and that
of interoperability, thereby stressing the impor- these media players are often free. The Commis-
tance of interoperability in the software industry in sion therefore undertook a detailed analysis of the
order to enhance competition and innovation. impact of Microsoft's behaviour, which included
extensive questionnaires to a range of content
In view of those exceptional circumstances, the providers, software developers and content
Commission concluded that Microsoft's behaviour owners.
amounted to an abuse of a dominant position.
The Decision outlined that the tying of Windows
4.2. Tying Media Player to Windows afforded Microsoft
unmatched ubiquity on PCs worldwide, because
The Decision expounds that tying prohibited under Windows Media Player instantly shares the ubiq-
Article 82 of the Treaty requires the presence of uity of Windows in newly-shipped PCs. The
the following elements: (i) the undertaking Commission's analysis of the relevant evidence
concerned is dominant in the tying product market; highlighted that other distribution means (e.g.
(ii) the tying and tied goods are two separate prod- downloading over the Internet, bundling with
ucts; (iii) the undertaking concerned affords other software or hardware, agreements with
consumers no choice to source the tying product OEMs and the retail channel) are second best. This
without the tied product; and (iv) tying forecloses guarantees content providers and software devel-
competition. In addition, it needs to be examined opers that if they use Microsoft's technology, they
whether there is any objective justification for the will be able to reach almost all PC users world-
tying. wide. Furthermore, the Commission's market
enquiry showed that supporting several technolo-
The Commission concluded that PC operating gies generates significant additional costs. As
systems and media players are separate products. such, Windows Media Player's ubiquitous pres-
This is because: (i) although Microsoft has been ence induces content providers and software
tying its media player with Windows for some developers to rely on Windows Media technology.
(1) Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs.
Due to the fact that applications and content are its use for the development of compatible
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largely specific to the proprietary infrastructure products. The disclosure order is limited to inter-
used, customers will in turn prefer using Windows face specifications (not source code), and to
Media Player, since a wider array of complemen- ensuring interoperability with the essential
tary software and content will be available for that features that define a typical work group network.
product. It applies not only to Sun but to any undertaking
that has an interest in developing products that
This self-reinforcing mechanism seriously under- constitute a competitive constraint to Microsoft's
mines the competitive process in the media player product in the work group server operating system
market to the detriment of innovation and the market.
consumer, and has spill-over effects on competi-
tion in other markets. For instance, it strengthens The conditions under which Microsoft makes
Microsoft's position on media encoding and these disclosures must be reasonable and non-
management software (often server-side). If discriminatory. Microsoft is allowed to require a
Microsoft came to control the media player reasonable and non-discriminatory remuneration
market, then its proprietary technology could for the production of the documentation, as well as
constitute a significant barrier to market entry, not for specific intellectual property rights that the
only to the media player market but also to related Decision might prevent it from fully enforcing
markets in which streaming media technologies against beneficiaries of the order to supply
are used (e.g. handheld devices). (provided that Microsoft can establish that these
specific intellectual property rights are valid in the
The Commission's analysis was supported by European Economic Area).
market data, as well as by surveys commissioned
by Microsoft itself. These figures showed a clear
trend in favour of usage of Windows Media Player 5.2. Tying
and Windows Media formats, to the detriment of
The Decision orders Microsoft to provide a
competitors. Microsoft's argument that its success
version of Windows which does not include
was the result of competition on the merits was not
Windows Media Player. PC manufacturers and
supported by the available evidence, which did not
consumers are thus left the choice to obtain
indicate a clear-cut lead of Windows Media Player
Windows with the media player of their — not
in terms of product quality.
Microsoft's — choice. To maintain competitive
Microsoft attempted to objectively justify its markets so that innovations succeed or fail on the
conduct by putting forward a number of efficiency merits is an important objective of this remedy
considerations related to distribution, and to the order. This will be beneficial to consumers. It is
protection of the coherence of Windows, which important to note that consumers have the benefit
according to Microsoft, outweighed any anti- of PC manufacturers acting as their "purchasing
competitive effects from tying. The Commission agents" in relation to media player vendors.
concluded that any such efficiencies could be Consumers will not be forced to do that job them-
achieved without resorting to tying. As for selves by rummaging through the web.
Microsoft's argument that tying Windows Media
It is worth noting that the Commission does not
Player would be efficient as it provided a focal
prevent Microsoft from also offering a bundled
point for developers of complementary and
version of Windows including Windows Media
compatible content and software, this is not a legit-
Player. However, the Decision makes clear that
imate argument under Community competition
Microsoft must not circumvent the decision by
law as it distorts competition on the merits.
engaging in technical or economic tying.
In light of the above, the Commission concluded
that Microsoft's tying of Windows Media Player 5.3. Monitoring regime
with Windows violated Article 82, and in partic-
ular paragraph (d). In order to enable the Commission to efficiently
oversee Microsoft's compliance with the Decision,
5. Remedies and fines a monitoring regime is foreseen by the Decision.
Microsoft is required to submit a proposal to that
effect, including provisions for the establishment
5.1. Interoperability of a monitoring trustee. The Decision outlines
what the Commission considers to be the neces-
The Decision orders Microsoft to disclose the sary tasks that the trustee should be able to carry
information that it has refused to supply and allow out. In essence, these are tasks that will assist the