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Microsoft Case Competition Policy - Prof. D. Neven 27 January 2005 Ursula Ferrari, Gözde Oktay, Nathalie Müller, Reinier De Jong Overview Chronology Technical Background Microsoft’s Behaviour Relevant Markets Dominant Position Abuses of Dominant Position:
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Microsoft Case Competition Policy - Prof. D. Neven 27 January 2005 Ursula Ferrari, Gã¶zde Oktay, Nathalie Mã¼ller, Reinier De Jong

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Overview Chronology Technical Background Microsoft’s Behavior Relevant Markets Dominant Position Abuses of Dominant Position: Not sharing interoperability data Bundeling Windows Media Player Conclusion

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Microsoft case COMP/C-3/37.792 Microsoft Commission Decision of 24 March 2004 identifying with a procedure under workmanship. 82 of the EC Treaty

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Parties Microsoft Corporation, USA, present inside of all EEA nations * Sun Microsystem, Inc., USA, present inside of all EEA nations **

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Chronology

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Chronology (I) 10 October 1998 protestation of Sun againts Microsoft to the Commission*: 1. Microsoft has a staggering predominant position in the PC working framework market 2. Microsoft is holding informations to itself for work bunch server working system**

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Chronology (II) Two explanations of complaints (August 2000, August 2001) sent to Microsoft:* Interoperability issue Windows Media Player (WMP) Microsoft reacted to both articulations of protests and rejected them. Microsoft asked for an oral listening to Market enquiry of the Commission send to 75 companies**

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Chronology (III) The Commission's choice, 24 March 2004 : Microsoft mishandled its overwhelming position under art.82 of the EC Treaty. Cures fine of 500 million Euros commitment to give the data requested for ensuring interoperability commitment to offer a Windows working framework form that does exclude WMP.

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Chronology (IV) Microsoft did not acknowledge the choice and went to the Court of First Instance (CFI) in june 2004, for requesting the suspension of the remedies.* The CFI, 22 December 2004, requested to release Microsoft‘s application for a suspension of remedies.** A definite choice of the CJE is still pending.***

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Chronology (V) Microsoft case in the US* In 1998, the US central government and 20 States made a grumbling against Microsoft, saying that there are 4 infringement of the Sherman Act on imposing business model maintenance.** The Court’s choice: Microsoft acted unlawfully in ensuring its restraining infrastructure and in hoarding the web-program market. Be that as it may, there were not adequate confirmation that Microsoft’s item packaging was abusing the Sherman Act. ***

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Technical Background

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Technical Background (I)* Computer framework : made of equipment and software** an open system***  i nteroperability should be guaranteed between results of distinctive suppliers.**** System programming : controls the equipment Application programming : gets directions from the hardware*****

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Technical Background (II) Operating System (OS) : controls the essential elements of a PC .* API (Application Programming Interfaces): not generally institutionalized, but rather proprietary.** Application system impact : the appropriating arrangement of programming assets over the system must be transparent.***

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Technical Background (III) Work bunch server OS administrations are utilized by office laborers capacity: sharing documents that are put away on servers, sharing printers; and decide how clients and gatherings can get to these administrations and different administrations of the system.

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Technical Background (IV) Media Player a product item that has the capacity play back sound and feature content* usefulness: to unravel, decompress and play computerized sound and feature documents downloaded or spilled over Internet**

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Products concerned

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Products concerned MS-DOS customer PC working framework Windows 3.0, 3.1; Windows NT* and Windows 2000 which depended on NT innovation WMP, WMP9**

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Microsoft‘s conduct

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Microsoft‘s conduct Commission : Microsoft mishandled a predominant position under craftsmanship. 82 of the EC Treaty. They have an overwhelming position in the pertinent business sector for the supply of customer PC OS furthermore in the applicable business sector of the work bunch server OS. The Commission recognized two distinct misuse :

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(1) Microsoft’s refusal to supply interoperability data Sun and alternate suppliers of server OS were not ready to contend viably against Microsoft, in light of the fact that they didn't have the between operability data required.

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(2) Bundling of Windows Media Player with Windows No adaptation of the Windows PC OS was accessible without including WMP. This debilitates the compelling rivalry in the business sector for the supply of media players. Reason: it is an exceptionally viable type of dispersing, yet no one but Microsoft can do it.

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The pertinent markets

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The significant markets The customer PC working framework market* The Workgroup server working framework market** The gushing media player market***

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Demand side substituability An important item market bargains each one of those items and/or administrations which are viewed as tradable or substituable by the shopper, by reason of the items attributes, their costs and their expected utilization (321)*

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Supply side substituability Suppliers have the capacity to change generation to the applicable items and business sector them in the transient without bringing about extra expenses or dangers because of little and perpetual changes in relative costs (322)*

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The customer PC working framework market

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Demand Side Substitutability There are OS particularly outlined and advertised as OS for Client PC ’s. This implies that OS proposed for distinctive PCs, (for example, a server) are not utilized on customer PC Hardware* There is no substitutability between other customer machines and the Client PC OS** There is no substitutability between Server working framework and Client PC OS***

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Demand Side Substitutability There are no practical substitutes on the interest side for customer PC OS

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Supply Side Substitutability Software designers not creating customer PC OS would not have the capacity to change their generation to customer PC OS without bringing about extra expenses and risks* Marketing viewpoint: forceful publicizing, which involves critical expenses and dangers Technical point of view: alteration of OS for different gadgets to a customer PC OS is immoderate and hazardous.

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Supply Side Substitutability There are no reasonable substitutes on the supply-side for customer PC OS

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The server working business sector

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Demand Side Substitutability Other OS (ex: Web serving) are not substitues for work bunch server OS. Workgroup servers satisfy an unmistakable arrangement of interrelated errands that are requested by consumers.* Contrary to different OS, work bunch server OS are improved to satisfy these tasks** Microsoft’s valuing procedure affirms the nonattendance of interest side substitutability between work bunch server OS and other server OS***

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Demand Side Substitutability There are no items that practice adequate focused weight on work bunch server OS

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Supply-side substitutability „Other OS sellers are not ready to switch their generation and appropriation advantages for Work bunch server OS without bringing about huge extra expenses and dangers and inside of a timeframework adequately short in order to consider that supply side-contemplations are relevantin this case“ (399)

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Supply-side substitutability There is no supply-side substitution for Work gathering Operating Systems.

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The media player market

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Streaming media players Is the spilling media player an item particular from an OS ? *

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Demand Side Substitutability The traditional play back gadgets (CD and DVD players) are not a substitue for Media Players*. They don't have the same interest. Media Players with comparable functionalities are the main items aggressive to WMP** Consumers need a media player wich has the capacity play and stream sound and feature documents. In this way, there is not substitutability in both ways.

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Supply Side Substitutability* To create, improve and advance another media player, including codecs, configurations and media spilling innovation, huge interests as far as examination, improvement and advancement are required. Market passage is difficult** The system impacts make that there are obstructions to section for new firms

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Conclusion Media Player Market Because there are no subsitutions, neither on interest nor supply side, the business sector for gushing media players is an important item showcase for this situation.

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Geographical market* For PC working framework, work bunch server OS and media player, the relative topographical business sector is world-wide.**

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Dominant Position Legal foundation and application to Microsoft Case

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Overview The General procurements set out in Articles 2 and 3 EC Treaty Article 82 and a general meaning of Dominant position The overwhelming position on account of Microsoft

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General procurements set out in the EC Treaty (i) Article 2 of the EC Treaty ; The Community should have as its errand, by setting up a typical business sector and a financial and money related union and by actualizing basic arrangements or exercises alluded to in Articles 3 and 4, to advance all through the Community an agreeable, adjusted and reasonable advancement of monetary exercises, an abnormal state of vocation and of social security, equity in the middle of men and ladies, practical andnon-inflationary development, a high level of aggressiveness and meeting of financial execution, an abnormal state of assurance and change of the earth's nature, the standard's raising of living and personal satisfaction and financial and social attachment and solidarity among Member States.

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The General procurements set out in The EC Treaty (ii)