EU Halts Microsoft Penalties

The European Union's executive branch, the European Commission, has temporarily suspended its competition remedy requiring Microsoft to begin offering a version of its Windows operating system without Windows Media Player. The move comes one day before the requirements were due to take effect.

"The European Commission has informed the European Court of First Instance [CFI] that, in the interest of a proper administration of justice, it has decided not to enforce the remedies adopted on March 24 while a Microsoft application for interim measures is being considered," the Commission says in a statement issued Sunday. The 90-day deadline for Microsoft to supply a version of the Windows operating system without its media player expires on Monday.

The Commission adds that it is "not appropriate" to enforce remedies before the CFI made its decision on a temporary stay.

As had been anticipated, Microsoft submitted its request last week to the CFI in Luxembourg, the European Union's second highest court, that it temporarily block the Commission's remedies prescribed as part of its competition decision against the software giant.

"The Commission's suspension was a very standard process step," says Microsoft's spokesperson in Brussels, Tom Brookes.

Ongoing Appeal

Microsoft is requesting that CFI President Bo Vesterdorf issue an interlocutory order to suspend the Commission remedies until the CFI decides whether to affirm or annul the decision, a process that is expected to take between three to five years. The interlocutory order, or temporary stay, from the CFI can come as soon as next week and though there are no set time limits in which the president must decide the matter, it is expected to be issued fairly swiftly. In the meantime, the Commission's suspension will stay in place until the CFI makes its ruling.

"We believe that suspension is in order and is necessary as the remedies will not only hurt Microsoft, they will hurt many other software development companies and Web site developers who have built products for the Windows platform. Most importantly, they will also harm consumers by limiting choice and degrading the usability of personal computers," says Horacio Gutierrez, Associate General Counsel, Microsoft EMEA in a statement.

The Commission says it still considers its remedies to be "reasonable, balanced, and necessary to restore competition in the marketplace," and should the CFI deny Microsoft's request for a stay, the Commission will enforce the sanctions "without delay."

Sources familiar with the case say should the CFI's temporary stay be granted, it would most likely be valid until September.

Changing Windows

In the Commission's March ruling, it gave Microsoft 90 days before it has to begin selling a version of its Windows operating system in Europe without the company's audio and video playing software, Windows Media Player, and 120 days in which it must reveal enough Windows code to allow rivals to build competing server software that can work properly with Windows, a period which expires July 27. The Commission also fined Microsoft $605 million (the value of the fine as of Monday).

Microsoft has declined to reveal if it has been preparing a version of Windows that is free of Media Player or if it could have begun making it available to retail stores and PC makers Monday, but Microsoft's Brookes says that the company has every intention of honoring the ruling. "We will comply with the Commission's orders once they become final," he says.

Should Microsoft be forced to begin selling a version of Windows without Media Player bundled in the software in Europe, there would mostly likely be no immediate change in content availability for different media formats, according to Dan Kusnetzky, an analyst with the research firm IDC, primarily because the move would not change what's installed on people's systems around the world.

"It may or may not make a different on what hardware OEMs install either," Kusnetzky says in an e-mail response to questions. "After all, it takes a while to develop and then test a load image for production. The hardware OEMs are not likely to have developed separate load images yet."