The reputations of Europe’s top anti-trust regulator and of one of the world’s most powerful multinational companies are on the line today as a nine-year legal battle comes to a head in an austere Luxembourg courtroom.

The European Court of Justice will deliver its verdict on a decision by the European Commission in March 2004 to find Microsoft guilty of illegal business practices. The Commission ordered the software group to make concessions to competitors and fined it € 497 million.

Repercussions of today’s judgment will spread far beyond the two main protagonists and may define the roles and responsibilities of regulators and market leaders in the fast-moving world of technology for years to come.

Since the record fine was imposed, the two sides have criticised each other’s behaviour. The Commission has accused Microsoft of stifling competitors and of dragging its feet in complying with its ruling. The software group has complained of unreasonable demands from regulators in Brussels. The US Government has complained formally to Neelie Kroes, the European Competition Commissioner, but to little effect.

In the run-up to today’s judgment, the war of words has abated. Neither party has attacked the other in recent weeks. Both are unsure how the judges will view allegations from almost ten years ago of corporate behaviour violating European competition rules alongside the commercial realities of today’s world.

At the heart of the case is the Commission’s belief that Microsoft used its dominant position in the market to freeze out rivals to the detriment of consumers.

It is said to have done so in two ways. First, by bundling Windows Media Player into its Windows operating system, suffocating competing media players. Secondly, it refused to supply crucial technical information about Windows to other companies, such as Sun Microsystems, making it impossible for them to programme their servers to be interoperable with Windows-driven equipment.

To put this right, the Commission ordered Microsoft to make available two versions of Windows — one with and one without the Media Player — and to share sensitive software codes on reasonable terms with other companies so that they could design compatible products that would be interoperable with Windows.

The first remedy had little effect. Only a few thousand versions of Windows without the Media Player were sold. Microsoft maintains that this was because of a lack of demand. The Commission retorts that the company’s earlier behaviour had already tipped the market so heavily in its favour that it was impossible for competitors to benefit from the space that it hoped to create.

The two sides are still arguing over the extent to which Microsoft has complied with the second remedy and in July last year the Commission slapped a second fine of € 280 million on Microsoft for foot-dragging.

Europe’s Court of First Instance is unlikely to come down clearly on one side or the other in such a complex case today. Sources suggest that it may support the Commission’s contention that Microsoft abused its dominant position, but may rule that the remedies that the Commission sought were inappropriate.

If the Commission is perceived to have lost the case, it will be extremely reluctant to take legal action against a company dominant in its own field in future. If the verdict goes against Microsoft, the multinational could be open to further anti-trust action.

Today’s judgment will take just five minutes to read out, but it will be considerably longer before lawyers will know whether, in their reasoning running to several hundred pages, the judges have answered the two fundamental questions at stake.

When may a company with a leading market share improve its products by adding or improving its features? Does a company with a leading market share have a duty to share its innovation with competitors so that they can copy it in their own products?

Even then, the long-running saga may not be over. Either side is free to appeal against today’s judgment before the senior court, the European Court of Justice — a process that could take several more years.

How we got here

December 1998 Sun Microsystems files complaint against Microsoft

August 2000 Commission criticises Microsoft’s practices

March 2004 Commission fines Microsoft € 497 million for market dominance abuse, demands corrective action

June Microsoft appeals to European Court of Justice to annul Commission decision. Files for stay on corrective action until its appeal against the fine is judged

December Europe’s Court of First Instance rejects any stay of action

July 2006 Commission fines Microsoft € 280 million for not fully implementing corrective action

September 17, 2007 Court of Justice rules on Microsoft appeal

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