Analysis: Opera seeks tougher remedy in Microsoft case

Microsoft was considered to have escaped lightly after the European Commission found it guilty in 2004 of bundling its media player software with Windows to the detriment of competition. It was ordered to sell a second version of Windows in Europe without its media player, but the new version was priced the same, few PC makers stocked it and the product effectively bombed in the market.

People continued to buy the original version of Windows, complete with the media player, and the remedy did little to help Microsoft’s rivals.

With its fresh antitrust suit filed with the Commission this week, browser maker Opera Software is hoping for a tougher penalty to rein in what it sees as Microsoft’s illegal bundling of its Internet Explorer (IE) browser with Windows. One legal expert said that this time around, Microsoft might not be so lucky.

“The landscape has changed quite a bit between Microsoft and the European Commission since the last ruling. If there’s a replay of what led up to the 2004 ruling, and Microsoft takes similar positions regarding bundling, then I wouldn’t be surprised if the Commission comes down harder now,” said Chris Norall, a partner in the Brussels office of the law firm Morrison & Foerster.

Opera argues that because each version of Windows comes with only IE preinstalled, Microsoft has an unfair advantage against rivals like Opera and Firefox. That has helped it maintain a consistent market share on Windows PCs of around 80 percent, Opera contends.

The Norwegian company now wants the Commission to come up with a tougher remedy to overcome Microsoft’s advantage. If the Commission agrees that the bundling of IE is just as illegal as the bundling of Windows Media Player was in 2004, its remedy this time “will be tougher, it will have teeth,” said Norall, whose law firm is not involved in the Microsoft case.

One possible outcome would be to make Microsoft offer a second version of Windows without Windows Media Player, and to sell it at a lower price than the “complete” version of Windows. That may give PC makers more incentive to offer it. Opera’s preferred solution, however, is simply to force Microsoft to pre-load other browsers with Windows when it ships.

“In our minds, the best solution would be one version of Windows with a must-carry type of provision,” said Jason Hoida, Opera’s deputy general counsel.

Microsoft is likely to fight that remedy fiercely. It says it will cooperate with the Commission’s investigation, but argues, as it has before, that consumers benefit from bundling its browser with Windows. What’s more, it notes, PC makers and consumers are free to install any other browser if they wish.

Microsoft’s position my be strengthened by the popularity of rival browsers in Europe, notably Firefox, which has reached a market share of close to 40 percent in some key markets, such as Germany, studies have shown. If Microsoft can argue that rivals to IE are gaining market share, it could help it persuade the Commission that antitrust intervention is not necessary.

Opera responds that the growth of other browsers has been levelling out. “Firefox has attracted a lot of users, especially in the open-source world, but it has not been climbing consistently,” said Hakon Wium Lie, Opera’s chief technology officer.

In addition, he said, Opera’s complaint is focussed on Windows PCs, where IE’s share is higher, and not that of Linux or Macintosh computers. However, it is uncertain that the Commission will exclude Linux and Macintosh computers when it considers the relevant market in this case.

Opera’s position may be helped by the previous antitrust judgment against Microsoft. Three months ago the Court of First Instance endorsed the legality of the Commission’s 2004 ruling when it threw out Microsoft’s appeal. The Commission will examine the new complaint “in light of the case law set in the Court of First Instance judgement,” Commission spokesman Jonathan Todd said Thursday.

Opera expects the case to move along faster than the seven years it took to reach the 2004 decision, since the Commission has already deemed Microsoft to be a monopolist, and because Microsoft opted against a further appeal against that decision. “There is an unappealed judgment, so we hope this will go faster,” Hoida said.

Thomas Vinje, a partner in the Brussels office of the law firm Clifford Chance, which is representing Opera in this case, said: “The complaint is very short. It doesn’t have far to look for a relevant legal precedent.”

In addition to the bundling charge, Opera also complains that Microsoft does not follow Web standards, putting rival browsers at a disadvantage. The issue is significant because if all Web browsers do not use the same standards, Web site developers are likely to design their Web sites to work with the most widely used browser, which is Internet Explorer. That gives people a disincentive to use other browsers.

Microsoft often takes part in debates over Web standards, and says it will implement them, but ultimately does not, Opera’s Lie said. He pointed to CSS, XHTML and DOM as areas where Microsoft does not comply with or is inconsistent.

The Opera complaint is the second against Microsoft filed to the Commission since the 2004 ruling. In February 2006, the European Committee for Interoperable Systems (ECIS) complained that Microsoft is foreclosing the market for productivity software with its Office package. Some expect more complaints to follow.

“The bundling issue is going to come up each time Microsoft adds a new feature to Windows. Will there be more complaints? Yes,” said Norall.

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