The long-running argument over sanctions imposed by the European Commission on
Microsoft, the US software giant, continues following the Court
of First Instance decision not to suspend the Commission's penalties.

The European Commission (the "Commission") decided in March 2004 that Microsoft had breached Article 82 EC by tying the
provision of its Windows operating system to a distinct type
of software, Windows Media Player, and by refusing to provide
competitors with information necessary to ensure the interoperability
of their hardware with desktop PCs running Windows.

The Commission had fined Microsoft £345m and
ordered it to take remedial steps. It was required to license
protocols for its work group server operating system to its competitors
(i.e. to provide information on the characteristics of such software
rather than to provide the source code) given that it is in such
a dominant position in the PC operating systems product market
that the protocols are effectively an 'essential facility' for
competitors; they are required so that competitors can build
and sell servers and server programs which can interoperate properly
with PCs running Windows. Moreover, it was required to offer
for sale a version of the Windows operating system without Windows
Media Player software embedded in it. However, under the sanction,
Microsoft is free to continue to market Windows with Windows
Media Player installed.

Microsoft was keen to come to a negotiated
settlement with the Commission. In the meantime, Microsoft had
asked the European Court of First Instance ("CFI") to suspend the Commission's sanctions until an appeal on the merits of the
Commission's decision can be heard in around three years time.

The CFI held that Microsoft's claims were
not shown to be unfounded at this stage and that a full hearing
would be necessary. However, the sanctions imposed by the Commission
should be implemented immediately given that Microsoft had failed
to lead any detailed evidence showing a risk of 'serious and
irreparable harm' to its interests. The CFI held that interference
with commercial freedom is an inherent aspect of such sanctions
and so something more than such interference must be shown. Otherwise,
all appeals would lead to interim suspension of such sanctions.

This interim decision is likely to have a
number of effects. Firstly, Microsoft will have to carefully
consider any future decision to tie new programs into operating
system software. Secondly, Microsoft's path to seeking a negotiated
settlement appears to be almost barred: the Court ruled that
the Commission's decisions are to be presumed to be lawful, subject
to later annulment. Therefore, any sanctions imposed should be
complied with and enforced immediately. However, Neelie Kroes,
the new Competition Commissioner, could decide to open talks
again rather than to defend the Commission's decision when the
full appeal on the merits of the case is heard in several years
time.

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