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Saturday, June 26, 2004 - Page updated at 12:00 A.M.
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Microsoft seeks delay in sanctions by the EU

By Brier Dudley
Seattle Times technology reporter

Microsoft chief counsel Brad Smith comments.
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Microsoft yesterday asked a European judge to delay antitrust sanctions that would force it to start selling a stripped-down version of Windows on Monday.

But the company has engineered a version of Windows with the media player removed for Europe, just in case. Brad Smith, the company's chief counsel, called it a "degraded version" of Windows that would hurt the brand and break its business model.

In March, Microsoft was found guilty of violating European Union antitrust laws. The European Commission, the union's executive arm, found that Microsoft's Windows monopoly provides an unfair advantage in the market for digital music and video players, and in the market for data-serving network computers.

The company was ordered to give European consumers the option of buying a stripped-down version of Windows. It also has to share certain Windows code and pay a fine of around $600 million.

Yesterday's filing asks for a long-term delay of the sanctions while the case is appealed, a process that could take several years. It also asks for a short-term delay, so the sanctions won't begin while the judge considers the long-term request.

The filing argues that:

• The commission's case creates new law that would stifle economic growth and harm consumers.

Microsoft and the EU


HERE'S WHAT is happening in Microsoft's European antitrust case.

March 24: European Commission finds Microsoft guilty, orders sanctions.

June 7: Microsoft appeals.

Yesterday: Microsoft asks that sanctions be delayed

Monday: Sanctions start taking effect; judge and commission may agree to short-term delay

Next month: Hearing on Microsoft's request for long-term delay while appeal is heard; remainder of sanctions take effect if there is no delay.

• Microsoft will suffer irreparable harm from the sanctions. Once Windows code is shared with rivals, it can't be taken back, Smith said.

• Competition is healthy in the digital media market, and competitors are doing well.

But competitors participating in the case contend Microsoft simply wants to prolong its anti-competitive practices.

Microsoft's push into the digital-media business is approaching a tipping point that will establish its dominance, the Computer & Communications Industry Association argued in a filing Wednesday.

The anti-Microsoft trade group asked to participate in the case and urged Judge Bo Vesterdorf of the European Court of First Instance, who is handling the case, to deny Microsoft's request for a stay.

"If they get a stay, then they can have every incentive in the world to drag the substantive appeal out," said Ed Black, the association's president.

RealNetworks will ask to intervene in the case, spokesman Greg Chiemingo said.

"They've already been found guilty," he said. "Their request for a stay is just part of their ongoing attempt to continue the conduct the commission found they were doing unlawfully."

Microsoft is preparing to release a new version of its media player this fall, and it plans to bundle the new player with a Windows update kit coming later this year.

Smith said that's not why Microsoft wants a delay. "I don't really see it that way," he said. "Either these things are going to take effect in the next few months or they're going to be suspended for a couple of years. I think it's more of a long-term issue."

Microsoft's filing also includes new data on the digital-media marketplace. It notes that Apple's iTunes European music service, which debuted June 15, sold 800,000 songs in its first week.

Microsoft also submitted reports showing that every large PC manufacturer in Europe and the United States bundles competing media players with their machines — including RealNetworks.

Smith also noted that U.S. antitrust sanctions are having an effect. Taking advantage of a provision that enabled PC makers to customize Windows, Dell, Hewlett-Packard, Gateway and IBM have all made Musicmatch's competing media player the default player on their machines, he said.

At the same time, Smith argued against completely removing Microsoft's media player.

"It's our business model to create a single, coherent platform," Smith said. "Having to pull pieces out breaks that business model. It's also the case that if we do this with the Windows trademark we risk creating confusion for consumers, thereby undermining the value of the trademark."

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

Copyright © 2004 The Seattle Times Company

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