Dealing Microsoft a major legal setback, a European court today rejected the software giant's appeal to suspend antitrust sanctions imposed by European...

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Dealing Microsoft a major legal setback, a European court today rejected the software giant’s appeal to suspend antitrust sanctions imposed by European regulators earlier this year.


The decision means Microsoft will have to change the way it does business in Europe. It must immediately provide a version of its Windows operating system with the Windows Media Player stripped out and make confidential technical information available to competitors.


Those penalties were imposed by the European Commission in March when it found Microsoft violated European antitrust law. The Commission also fined the company 497 million euros ($612 million).


Microsoft had argued before the Court of First Instance, based in Luxembourg, that the penalties should be postponed while its full appeal of the case is heard.


The judge in the case, Court President Bo Vesterdorf, said Microsoft failed to show it would suffer “serious and irreparable damage” by carrying out the remedies imposed by the court.


Microsoft General Counsel Brad Smith said the company will comply with the ruling and has not decided whether to appeal the rejection of the postponement to Europe’s highest court.


“Compliance is our first order of business today,” he said. While the company lost the cushion of time to delay the measures, Smith said he found some reason for optimism in Versterdorf’s analysis of the case.


“The court recognized we have a number of arguments that are important and could well enable us to win at the end of the judicial day,” he said.


Smith said the company will provide a version of Windows minus the media player to European computer manufacturers in January, and expects resellers in Europe to have the version available for sale by February. Microsoft will charge the same price for the stripped-down version as it does for the original product, Smith said.


The company will also start a Web site for competitors to begin licensing Microsoft’s communications protocols, which enable competing server software to operate smoothly with Windows.


Seattle-based RealNetworks, which makes a competing media player, hailed the ruling as a victory.


“The court’s denial of Microsoft’s attempt to continue the unlawful conduct condemned by the European Commission is a victory for the commission and for the consumers the commission is working to protect,” said Dave Stewart, RealNetworks Deputy General Counsel.


“For the first time PC makers will be given greater flexibility to configure their PCs the way they want,” he said. “To the extent PC makers, consumers and content providers decide what media player to support based on merits rather than monopoly, we believe that will be good for RealNetworks.”


Today’s decision could make it harder for Microsoft to prevail in its appeal, said Mark Schechter, a former Justice Department deputy director who heads the government antitrust practice at the law firm Howrey Simon Arnold & White in Washington, D.C.


If Microsoft changes its business practices and provides information to competitors, it could result in changes to the marketplace that are difficult to reverse.


“The practical reality is they have to go forward,” he said. “They can’t rely on the passage of time for them to obviate the impact of any decision.”


Even if the court reverses the commission later, “there will be a whole market that’s dependent on the information.”