World and Nation

Antitrust Ruling Against Microsoft May Bode Ill For Other Companies

Europe’s second-highest court delivered a stinging rebuke to Microsoft on Monday, but the impact of the decision upholding an earlier antitrust ruling may extend well beyond the world’s largest software maker to other high-technology companies.

Software and legal experts said the European ruling might signal problems for companies like Apple, Intel and Qualcomm, whose market dominance in online music downloads, computer chips and mobile phone technology is also being scrutinized by the European Commission.

“The decision is a strong endorsement for what in the United States would be considered aggressive policy on dominant firms,” said Andrew I. Gavil, a law professor at Howard University. “And that’s going to continue to play out in other kinds of cases.”

The 13-member European Court of First Instance, in a starkly worded 244-page summary, reaffirmed that Microsoft had abused its market power by adding a digital media player into Windows, undercutting the early leader, Real Networks.

It also ordered Microsoft to obey a March 2004 commission order to share confidential computer code with competitors. The court also upheld the record fine levied against the company, 497.2 million euros, or $689.4 million.

But the court decision comes as the center of gravity in computing is shifting away from the software for personal computers, Microsoft’s stronghold. Increasingly, the e-mailing or word-processing functions of a computer can be performed with software delivered on a Web browser. Other devices like cell phones are now used as alternates to personal computers.

The real challenge to Microsoft, after more than a decade of dominating the technology industry, is coming not from the government, but from the marketplace.

The direct impact on Microsoft is small, said David B. Yoffie, a professor at the Harvard Business School. But there may be a longer-range consequence of having Microsoft under constant, open-ended scrutiny from Europe.

“If you end up handicapping a major player in new markets, you may actually not enhance competition but hinder it, and help create new monopolies,” Yoffie said. “The obvious example is Google in Internet search and Apple in digital music.”

Indeed, the Justice Department issued a statement expressing its concerns with the European decision, saying that tough restraints on powerful companies can be harmful. Thomas O. Barnett, assistant attorney general for the department’s antitrust division, said that the effect “rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition.”

Consumer welfare, not protecting competitors, should be the guiding standard in antitrust, Barnett said.

Antitrust enforcement has often been criticized as too slow to grapple with fast-moving high-technology markets. Indeed, the media player market changed drastically during the years-long investigation in Europe.