A history of challenging big tech – Part I: Interoperability and a Media Player

Everyone speaks about regulating big tech. We have also blogged about this topic several times (inter alia here, here and here). In the context of the current discussion, however, it should not be forgotten that “regulating big tech” already has a certain history. The current draft of the Digital Markets Act also contains some provisions modelled after cases from the past. One more reason to keep these cases in mind. To start with, we take a look at the first case the European Commission brought up against Microsoft.

The prehistory

The first publicly known investigation against Microsoft by the European Commission started in 1993 (so only 18 years after the company was founded). Novell, a manufacturer of a computer operating system, complaint about Microsoft’s marketing practice regarding its MS-DOS system (for those of you born in the Nineties or later, this was the predecessor of the “you need to type in commands”-operating system we had before Microsoft’s Windows). According to Novell, Microsoft’s practice of asking PC manufacturers to pay royalties for each shipped computer, regardless of whether these computers had MS-DOS installed or not, hindered competition because this disincentivised PC manufacturers to install other operating systems. The case was settled in 1994, when Microsoft agreed to abstain from certain practices.

Facts of the case and history of the proceeding

In 1998, Sun Microsystems filed a complaint with the European Commission, claiming that Microsoft refused to supply interoperability information relating to Microsoft Products and allow its use for the purpose of developing and distributing work group server operating systems. On 1 August 2000, the European Commission issued a Statement of Objections to Microsoft, claiming that Microsoft had abused its dominant position by failing to disclose necessary interoperability information to its competitors.

After some back and forth, the European Commission issued a second Statement of Objections, which introduced a second allegation against Microsoft by claiming that it leveraged its Windows monopoly to promote the Windows Media Player, which was pre-installed in all versions of Windows at the time. Thus, according to the European Commission, customers had no incentive to buy other media players.

In the course of the proceedings, the European Commission proposed that Microsoft should reveal the required interoperability information so that companies like Sun Microsystems were able to compete on a level-playing field with Microsoft. Furthermore, Microsoft should either offer a version of Windows without Windows Media Player or a version which had competing media players pre-installed (hello, mobile operating system cases of today!). While Microsoft admitted that it held a dominant position on the market for PC operating systems, the European Commission and Microsoft could not agree on a settlement.

The European Commission decision

Only six years after the initial complaint, in 2004, the European Commission then issued a decision against Microsoft based on Art. 102 TFEU. The European Commission held that Microsoft had a dominant position on the market for PC operating systems with a market share above 90%. According to the European Commission, Microsoft’s refusal to provide Sun with the required information to design workgroup server operating systems that can seamlessly integrate with Microsoft products was a refusal to supply and led to the risk of eliminating competition in the relevant market for workgroup server operating systems. Furthermore, the European Commission held that Microsoft foreclosed competition on the market for media players by tying the Windows Media Player to the Windows PC operating system.

The decision ordered Microsoft to disclose the interoperability information and to allow its use for the development of compatible products for any undertaking that had an interest in developing the products in question. With regard to the tying abuse, the decision ordered Microsoft to offer to end users and OEMs for sale in the EEA a full functioning version of Windows which did not incorporate the Windows Media Player (while Microsoft retained the right to offer a bundle of Windows and the Windows Media Player). In addition to these remedies, the European Commission levied a fine of EUR 497.2 million.

The aftermath

I must warn you, that the aftermath in this case is even longer than the main game, but I will try to keep it short. Following the decision, Microsoft filed an application for a suspension of the remedies before the European General Court (at this time known as the Court of First Instance, CFI) in June 2004. The European Commission decided not to enforce the remedies before the decision of the CFI. The CFI dismissed Microsoft’s application in December 2004. Still, Microsoft did appeal the entire 2004 decision.

Nonetheless, the European Commission found that Microsoft did not comply with the remedies, because it did still not supply complete and accurate interoperability information on reasonable terms. The European Commission then fined Microsoft another EUR 280.5 million for its continued non-compliance with some of its obligations under the European Commission’s 2004 Decision.

On 17 September 2007, the CFI upheld the 2004 decision of the European Commission (T-201/04 – Microsoft v Commission). With regard to the interoperability, the CFI held that indispensability could also be given if it was not economic viable to offer products without the access to Microsoft’s interoperability information (in earlier cases the court had held that the absence of a potential or actual substitute was required). The CFI also held that the European Commission was not required to prove that all competition on the market was actually eliminated and that the likelihood to eliminate competition was sufficient. With regard to the Windows Media Player, the CFI confirmed that the media player was a separate product to the PC operating system (something which was heavily disputed by Microsoft, which argued that the media player function was an integral part of a PC operating system). This decision was not further appealed by Microsoft.

The European Commission later also found that Microsoft had charged unreasonable prices for access to interoperability documentation for work group servers. Thus, it fined Microsoft another EUR 899 million for its non-compliance with the 2004 decision in February 2008 (at the time the largest fine ever imposed on a company).

Microsoft appealed the decision, but the decision was upheld by the European General Court in 2012. However, the court reduced the fine to EUR 860 million (T-167/08 Microsoft v Commission).  

Regarding the Media Player, the remedies imposed by the European Commission are regarded widely by some as a failure. Reportedly, very few customers decided to buy a Windows version without the Media Player (so essentially a product with less functionality). There were headlines saying “No One Wants EU Windows”.

Key takeaways

The case – which is for some reason more known for its media player angle – was the first large fine the European Commission imposed on a big tech company. While the case is also very interesting for its findings on refusal to supply and tying, the length and the history of the procedure are remarkable. And, the issues around combining the Media Player with Windows seem to have a direct link to today’s cases around the pre-installed use of browsers and search engines on mobile phones, the combination of Microsoft Teams with Windows, and Microsoft’s cloud offering. In the final post of this series and once the final version has been confirmed, we will outline if and how the gist of the decision has found its way into the Digital Markets Act.

So, please stay tuned for additional posts in this series. It is very likely that we will “meet” Microsoft again.