Microsoft 'like a cobbler banned from selling laces'

Microsoft said yesterday that consumers had boycotted a scaled-down version of Windows, produced to satisfy EU regulators, and claimed it was being treated like a cobbler ordered to sell shoes without laces.

Opening one of the most important appeals in European competition history, Microsoft said that retailers' orders of a version of Windows without Media Player software amounted to just 1,787. That is equivalent to 0.005 per cent of overall European sales of 35 million units.

But the European Commission replied with a firm counter-attack, describing the ubiquitous Windows programme as a "virtual monopoly", and claiming that Microsoft is driving rivals out of market and having a "chilling effect" on innovation.

The world's biggest software manufacturer is appealing against a record fine of €497.2m (£344.6m) imposed in March 2004 for abuse of its dominant market position. Microsoft was also ordered to produce Windows XP N without Media Player, which is used to view video and listen to music, and to provide technical information to allow competitors to make software compatible with Windows.

Yesterday Microsoft's lawyer, Jean-François Bellis, accused the Commission of "fundamental errors of fact and reasoning". Evidence presented against the US corporation includes one internal e-mail discussing the "streaming battle against progressive networks", adding that the comment of the Microsoft founder, Bill Gates, "was 'this is a strategic area and we need to win it'".

M. Bellis disputed the central Commission argument that the programme was being bundled together with Windows, thereby depriving consumers of the choice of using other programmes such as RealPlayer, and prompting most content providers to use the Microsoft format.

The case may turn on whether, by dint of its sheer size and global reach, the judges agree that regulators need to rein in the US corporation to allow the market to function.

The stakes are high for both sides in the five-day appeal hearing at the Court of First Instance in Luxembourg. A defeat for the European Commission, which has lost several other big cases on appeal, would deal a serious blow to its credibility as a regulator.

But if it wins, the European Commission can be expected to step up its moves to force Microsoft - which has about 95 per cent of the desktop PC market - to share information with rivals.

Ridiculing the Commission's order for the creation of a version of Windows without Media Player, M. Bellis said the few consumers who bought it might have done so "by mistake" or as a souvenir of a programme designed by the European Commission's Competition directorate.

"One has to consider whether there is a demand for shoes without laces," he said, adding, "since customers want to buy shoes with laces it has become commercial practice, therefore it is not tying".

That analogy was disputed by Per Hellström, representing the European Commission, who said the situation was more like one in which shoemakers obliged consumers to buy laces from them.