EU Microsoft Sanctions to Stay

LUXEMBOURG / BRUSSELS -- Microsoft Corporation lost a European Union court appeal on Wednesday against sanctions imposed by EU regulators that will force it to change business practices and sell a stripped-down version of Windows.

The Court of First Instance upheld the penalties imposed by the executive European Commission in March when it found the U.S. software giant had abused the virtual monopoly of its computer operating system Windows and levied a record fine.

"Microsoft has not demonstrated specifically that it might suffer serious and irreparable damage," Court of First Instance President Bo Vesterdorf said. "The application must therefore be dismissed in its entirety."

His decision means the EU antitrust regulator's remedies take effect immediately.

Microsoft said it would comply from next month with the order to sell to computer makers a version of Windows without its trademark Windows Media Player music and video software and share secret specifications with rival makers of servers.

"We will move forward immediately to comply with today's decision," Microsoft's general counsel, Brad Smith, said in a conference call with reporters. He said the company had not yet decided whether to appeal against Wednesday's order.

Vesterdorf's order was a setback to Microsoft's push for a negotiated settlement that might require the EU executive to rescind a major decision for the first time in its history.

Smith nevertheless urged the commission to consider fresh settlement talks, arguing the judge had found some merit in Microsoft's arguments on the substance of the case.

"Is there enough here for the commission to restart settlement negotiations?" he asked. "There's nothing here to guarantee that either side is going to win at the end of the day."

But commission competition spokesman Jonathan Todd said the court decision had upheld the effectiveness of antitrust action and the EU executive was "not in a process of re-negotiation" with the software giant.

He noted that judges find some merit in 90 percent of such cases, but that doesn't mean the appeal will prevail.

Microsoft shares were slightly weaker in late-morning trading in Frankfurt.

"This is a victory for consumers," said Thomas Vinje, a Brussels lawyer who represented an industry group which dropped out of the case after a $20 million settlement with Microsoft.

EU courts have overturned a string of high-profile commission anti-monopoly and merger control rulings in recent years.

The decision by the second-highest EU court can be appealed to the European Court of Justice, which would take another three to eight months, experts say.

Microsoft's main appeal will be heard by a panel of five judges of the lower court that will not include Vesterdorf.

Microsoft wanted the penalties, which the commission suspended temporarily during this appeal, frozen until its court case on the substance of the EU ruling finishes years from now.

The EU executive argued that the market would have moved on and the sanctions would be obsolete.