Page last updated at 22:12 GMT, Monday, 24 April 2006 23:12 UK

EU ruling on Microsoft 'flawed'

Microsoft legal chief Brad Smith
Microsoft lawyer Brad Smith claims the firm did not stifle competition

The European Commission made "fundamental errors" in its 2004 ruling that Microsoft broke competition law, the firm has told a top European court.

Microsoft made the claim at the start of its appeal against the ruling. The verdict could have a major impact on future European anti-trust decisions.

Brussels fined the US giant 497m euros ($613m; 344m) in 2004 and told it to open up its software to its rivals.

Microsoft says it acted legally and the judgement should be overturned.

The appeal is being heard over five days by the 13 judges of the Grand Chamber of the European Union's Court of First Instance in Luxembourg.

If Microsoft wins the appeal it would mark a drastic blow for competition regulations at the European Commission in Brussels.


In his opening statement, Microsoft lawyer Jean-Francois Bellis said that the Commission's findings had been "flawed at every step".

Microsoft doesn't let users choose ... it chooses itself what users will have as product
Thomas Vinje, lawyer

He argued that the Commission was wrong to demand in the 2004 judgement that Microsoft unbundle its own media or audio-visual player from its Windows operating system.

Far from stifling similar systems from rival firms, competition in the media player market was thriving, he said - pointing to the success of Apple's iTunes to back up their claims.

Furthermore, Mr Bellis argued that the Commission's decision to force Microsoft to offer a version of Windows without any media player system - known as XPN - had failed.

"As of today no PC maker has shipped a version of XPN ... not a single one," he told the court.

'Competition eliminated'

But Commission lawyer Per Hellstrom said Microsoft's arguments were irrelevant because consumers did not have real freedom of choice over the media software they are offered.

"Microsoft's pleas must be ignored," he told the court.

"This is the world according to Microsoft where it decides what is best for consumers."

Meanwhile a coalition of Microsoft's rivals - The European Committee for Interoperable Systems (ECIS) - presented an internal Microsoft memo to the court, which suggested that the US giant had a strategy to drive rivals out of business.

The memo - dated 5 June, 1997 and from Microsoft executive Jim Durkin - recalled a meeting with other top executives discussing a strategy to take on Realnetworks and its rival media player.

A few months later Microsoft tied its streaming media to Windows - a move that Brussels declared an illegal means of killing off competitors in its 2004 ruling.

Outside the court ECIS lawyer Thomas Vinje claimed that Microsoft were not playing fair in the software market.

"If Microsoft were to compete on the merits of its own products, that would be perfectly fine and everyone would be happy with that," he said.

"Microsoft does not compete on the merits. Microsoft doesn't let users choose ... it chooses itself what users will have as product."

The appeal will be heard over five days, but a decision is not expected to be delivered until the end of this year at the earliest.

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