Court to weigh power of EU Commission vs Microsoft

LUXEMBOURG, Apr 23 (Reuters) A European Union court will hear high-stakes arguments this week on whether to curtail the European Commission's power as an antitrust watchdog or endorse forcing Microsoft to change its business practices.

A 13-judge panel of the Court of First Instance opens five days of hearings on Monday to determine if the Commission was right to rule in 2004 that Microsoft had abused a near monopoly in its Windows operating system to muscle out rivals.

''The objective of this decision is to ensure that Microsoft's competitors can develop products that interoperate with the Windows (operating system) ... and viably compete,'' the Commission said at the time.

It imposed a record 497 million euro (3 million) fine and ordered Microsoft change the way it sells software.

Microsoft says it acted legally, others can compete fairly and that the court -- the second highest in the EU -- should throw out the Commission decision.

''There is healthy competition and interoperability in all the markets covered in this case, and we will bring those facts to the court next week,'' the company said in a statement.

If Microsoft prevails, Brussels' authority for any future action against the company will be in tatters.

The Commission's power as Europe's premier competition regulator has already suffered three court reversals in smaller cases. Another defeat would be a huge blow to its prestige.

The European decision parallels one in the United States, where appeals courts found in 2001 that Microsoft's competitive tactics were against the law.

Microsoft never acknowledged its US business practices were wrong. After a more friendly administration took office under President George W. Bush, it faced only mild sanctions.

The same practices that sparked the original US case prompted the European Commission to take action.

A decision in the case is not expected for months, possibly a year.

MORE ACTION If the Commission wins, it will take more action.

Competition Commissioner Neelie Kroes has already written to Microsoft Chief Executive Steve Ballmer seeking information about the company's forthcoming new Windows version, Vista.

The Commission decision involved audiovisual software as well as the connections between desktops and laptops and central computers, called servers, used to print documents, access files and sign on.

Other companies at one time took the initiative and captured a large share of the market, among them RealNetworks RealPlayer for audiovisual software and Novell and Samba for servers.

Then Microsoft developed competing products, and set out to get people to switch to them.

The European Commission held that Microsoft skewed the scales by taking advantage of the power it enjoyed as a result of more than 90 percent of the world's laptops and desktops running on the Windows operating system.

All programmes on those computers balance on top of Windows and depend on its support and interconnection information. This was particularly true of servers.

''Microsoft's initial policy was to disclose and not to withhold interoperability information,'' the Court said in a summary of the Commission's arguments.

But the Commission said Microsoft changed its tune once it decided to take over the market. And now rival server software does not work nearly as smoothly as that of Microsoft.

Microsoft argues that others can interoperate, in varying degrees, and that it is protected by property rights from sharing a lot of information with its competitors.

''At issue are whether companies can improve their products by developing new features, and whether a successful company must hand over its valuable intellectual property to competitors,'' the company said.

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