Final report of the Hearing Officer in Case COMP/C-3/37.792 — Microsoft (Pursuant to Articles 15 and 16 of Commission Decision 2001/462/EC, ECSC of 23 May 2001 on the terms of reference of Hearing Officers in certain competition proceedings — OJ L 162, 19.6.2001, p. 21 )
Date: 2006-07-03
Institutions: European Commission
Subjects: access to information, audit, disclosure of information, economic concentration, information technology industry, merger control, report, technical standard

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Final report of the Hearing Officer in Case COMP/C-3/37.792 — Microsoft

(Pursuant to Articles 15 and 16 of Commission Decision 2001/462/EC, ECSC of 23 May 2001 on the terms of
reference of Hearing Officers in certain competition proceedings — OJ L 162, 19.6.2001, p. 21)

(2008/C 138/05)

The draft decision in this case gives rise to the following observations:

The Article 24(1) procedure based on the final decision of 24 March 2004

On 24 March 2004, the Commission adopted a decision in a proceeding pursuant to Article 82 of the
EC Treaty (Case COMP/C-3/37.792) addressed to Microsoft Corporation (‘Microsoft’). In this decision (‘the
Final Decision’), the Commission found, inter alia, that Microsoft had infringed Article 82 of the EC Treaty
(‘Article 82’) and Article 54 of the EEA Agreement by refusing, from October 1998 until the date of the
Decision, to disclose certain specified ‘Interoperability Information’ to vendors of work group server oper-
ating system products, so that they could develop and distribute such products (1).

On 10 November 2005, the Commission adopted a Decision pursuant to Article 24(1) of Regulation (EC)
No 1/2003 (the ‘Article 24(1) Decision’). Article 1 of this Decision orders that ‘Microsoft Corporation shall
ensure that, by 15 December 2005, it fully complies with the obligations set out in Article 5(a) and (c) of
the Final Decision. In the absence of such compliance, a periodic penalty payment of EUR 2 million per day,
calculated from that date, shall be imposed on Microsoft Corporation’.

The Article 24(1) Decision identified two instances where Microsoft failed to comply with its obligations
under Article 5(a) and (c) of the Final Decision. This proceeding solely concerns the allegation that Microsoft
has failed to provide complete and accurate technical documentation embodying the Interoperability Infor-
mation it was ordered to provide under the Final Decision.

Measures taken by Microsoft to provide complete and accurate technical documentation and the Commission's reactions

On 14 December 2004, Microsoft sent a technical documentation (specifications) that Microsoft had
prepared for the relevant protocols (‘Technical Documentation’) to the Commission. OTR, the Commission's
external technical experts, reviewed this Technical Documentation and provided a negative report (‘the first
OTR report’) as regards its completeness, accuracy and fitness for purpose. On 15 June 2005, the Commis-
sion services sent the first OTR report to Microsoft for comments. Microsoft provided its response to the
first OTR report on 8 July 2005.

By decision of 28 July 2005, the Commission established a monitoring mechanism by providing for the
appointment, functions and obligations of a Monitoring Trustee. The Trustee's function is to assist the
Commission in overseeing compliance with the Final Decision (2). On 5 October 2005, the Commission
chose one person from a shortlist of four experts submitted by Microsoft, as Monitoring Trustee.

In response to the concerns raised in the first OTR report on the information in the Technical Documenta-
tion, Microsoft provided an updated version of the Technical Documentation to the Commission services on
8 August 2005.

(1) Article 5 of the operative part of the Final Decision reads:

‘As regards the abuse referred to in Article 2(a):
(a) Microsoft Corporation shall, within 120 days of the date of notification of this Decision, make the Interoperability
Information available to any undertaking having an interest in developing and distributing work group server oper-
ating system products and shall, on reasonable and non-discriminatory terms, allow the use of the Interoperability
Information by such undertakings for the purpose of developing and distributing work group server operating
system products.

(b) Microsoft Corporation shall ensure that the Interoperability Information made available is kept updated on an

ongoing basis and in a Timely Manner.

(c) Microsoft Corporation shall, within 120 days of the date of notification of this Decision, set up an evaluation
mechanism that will give interested undertakings a workable possibility of informing themselves about the scope
and terms of use of the Interoperability Information; as regards this evaluation mechanism, Microsoft Corporation
may impose reasonable and non-discriminatory conditions to ensure that access to the Interoperability Information
is granted for evaluation purposes only.’ […].

(2) Cf. Article 7 of the Decision and Article 3 of the Trustee Decision.

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This version of the Technical Documentation was also reviewed by OTR. OTR provided an updated report
on the completeness and accuracy of the Technical Documentation which maintained OTR's negative view.

In order to fulfil its obligations under Article 5(c) of the Final Decision, Microsoft has made an Evaluation
Agreement available to interested undertakings. Four companies (Novell, IBM, Oracle and Sun) have to date
entered into three-day evaluation agreements with Microsoft. The Commission services have requested these
companies to submit both a detailed description of how the evaluation took place on-site, and an assessment
of whether the Technical Documentation examined in the course of the evaluation provides complete and
accurate specifications for the protocols covered by the Decision, as well as their views on the value of the
technology disclosed through the Technical Documentation.

In response to two Commission's requests (one in September/October 2005 and another one in
March 2006), Novell, IBM, Oracle and Sun provided critical comments as to the adequacy and sufficiency of
the Technical Documentation provided.

On 11 and 23 November 2005, Microsoft submitted a revised Technical Documentation (‘the November
2005 Technical Documentation’). On 30 November 2005, the Trustee submitted a Preliminary Report on
Microsoft's revised Technical Documentation, which was sent to Microsoft. On 15 December 2005, the
Trustee submitted its Final Report on the November 2005 Technical Documentation.

On 15 December 2005, Microsoft submitted a response to the Trustee's Preliminary Report and announced
that a further revised Technical Documentation (‘the 15 December 2005 Technical Documentation’) was
available in Redmond. This third version of the Technical Documentation, which was not received by the
Commission before 26 December 2005, was commented on in a report drawn up by the Trustee on
3 March 2006.

The Statement of Objections

On 21 December 2005, the Commission submitted a Statement of Objections to Microsoft, expressing its
preliminary views that the revised Technical Documentation submitted on 11 and 23 November 2005 was
still insufficient to comply with Microsoft's obligations under Article 5(a) and (c) of the Final Decision. The
Statement of Objections also referred to the third version of the technical documentation, by making the
point that that the changes in the 15 December 2005 version of the Technical Documentation were essen-
tially limited to the formatting. The Commission concluded that the 15 December 2005 version of the Tech-
nical Documentation did not remedy the shortcomings identified in the previous versions. The Trustee's
Reports were annexed to the Statement of Objections.

Microsoft was asked to respond by 31 January 2006. Upon Microsoft's request, I extended this deadline
until 15 February 2006, in particular in order to allow Microsoft's outside experts to elaborate reasoned
opinions on the criticism voiced by the Commission. This extended deadline was complied with.

At the oral hearing and in their written response, Microsoft claimed that the Statement of Objections was
fundamentally flawed because it did not take sufficient account of the Technical Documentation announced
by Microsoft on 15 December 2005. As Microsoft had informed the Commission that the Technical Docu-
mentation would be ready for inspection as of 15 December, the Commission should have waited until a
copy of the Technical Documentation arrived in Brussels rather than issuing the Statement of Objections
before.

I do not share Microsoft's view that the Statement of Objections was flawed. As acknowledged by the case
law, a Statement of Objections is a document stating preliminary findings. Until a decision has been
adopted, the Commission may alter or supplement its position expressed therein provided that it affords the
undertakings concerned the opportunity of making known their views in that respect (1). In the letter of
facts issued on 10 March 2006 (see below), Microsoft was duly informed of the Commission's assessment as
to the third version of the Technical Documentation submitted by Microsoft and was given sufficient time
to state their views. Accordingly, in my view, Microsoft cannot claim a breach of their rights with regard to
the issuance of the Statement of Objections.

(1) Judgement of the Court of First Instance of 30 September 2003, in Joined Cases T-191/98 and T-212/98 to T-214/98,

Atlantic Container Line, paragraph 115.

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Microsoft's further submissions and the ‘letter of facts’

On 25 January 2006, Microsoft offered to licensees of the Technical Documentation access to Windows
source code by means of a source code reference licence.

On 30 January 2006, Microsoft handed over a fourth version of the Technical Documentation to the rele-
vant Commission services.

On 10 March 2006, the Commission submitted a document (‘letter of facts’) to Microsoft explaining that
the 15 December 2005 version of the Technical Documentation was considered to be insufficient to comply
with the Final Decision. Furthermore, Microsoft was informed that the source code disclosures were consid-
ered to be irrelevant for Microsoft's obligations under Article 5(a) and (c) of the Final Decision. A report
drawn up by the Trustee addressing the third version of the Technical Documentation and a report drawn
up by TAEUS addressing the fourth version of the Technical Documentation, albeit only by examining the
specifications of one of the protocols, were annexed.

Microsoft was given the opportunity to comment on the letter of facts within two weeks.

By letter of 14 March 2006 Microsoft took the view that the letter of facts set forth new allegations and
therefore constituted a supplementary statement of objections, the issuance of which would require a dead-
line to reply of four weeks. In particular, Microsoft considered that the assertion contained in the letter of
facts according to which the third version of the Technical Documentation did not comply with Articles 5(a)
and (c) of the Commission decision of 24 March 2004, constituted a new allegation.

In my response of 17 March 2006, I stated that I did not share Microsoft's view that the Commission's
letter of facts set out objections not contained in the Commission's Statement of Objections. In my view,
addressing in more detail the 15 December 2005 version of the Technical Documentation did not amount
to raising new objections against Microsoft but rather maintained the existing objections in the light of new
facts. Accordingly, I did not accede to Microsoft's requests. However, in particular with a view to allowing
Microsoft to focus on the preparation of the oral hearing in the ensuing days, both with regard to the State-
ment of Objections and with regard to the letter of facts, I did not require that Microsoft provide a written
submission to the letter of facts prior to the oral hearing, and granted Microsoft until two weeks after the
oral hearing, i.e., until 14 April 2006, to submit written comments on the letter of facts. This deadline was
complied with.

Microsoft's further submissions and the Commission's second letter of facts

On 11 April 2006, Microsoft submitted a further revised version of the Technical Documentation.

Following a meeting between the Trustee and representatives from Microsoft and the Commission on
7 and 8 April 2006 and a letter by the Member of the Commission responsible for Competition to
Microsoft's Chief Executive Officer of 13 April 2006, Microsoft provided the Trustee on 22 April 2006 with
a work plan for the delivery of complete and accurate Technical Documentation. This work plan foresees
that a revised Technical Documentation for the bulk of the protocols described therein will be delivered by
30 June 2006 and that the Technical Documentation for the remaining protocols described therein will be
delivered by 18 July 2006.

On 15 May 2006, the Trustee submitted two reports: one providing comments on the reports from
Microsoft's technical experts, that were enclosed with Microsoft's letter of 14 April 2006 and a second
report providing an assessment of the completeness and accuracy of the Technical Documentation submitted
by Microsoft on 11 April 2006.

On 15 May 2006, TAEUS submitted a report providing an assessment of the completeness and accuracy of
this documentation and providing comments on the reports of Microsoft's expert. This report was submitted
to Microsoft on 19 May 2006 together with the 15 May 2006 Trustee report and the Trustee's Report on
the Technical Documentation submitted by Microsoft on 11 April 2006. With the same letter the Commis-
sion informed Microsoft of its assessment that the objections raised on 21 December 2005 as regards the
completeness and accuracy of the Technical Documentation had not been addressed and thus remained
valid. The Commission invited Microsoft to submit comments within two weeks from receipt thereof.

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On 23 May 2006, Microsoft requested that the deadline to respond to the Commission's 19 May 2006
letter be extended by two weeks.

On 30 May 2006, I agreed to extend the deadline for Microsoft to respond to the Commission's 19 May
2006 letter until 9 June 2006.

On 9 June 2006, Microsoft responded to the 19 May 2006 letter. This response included two further
reports of Microsoft's technical experts.

Access to file

Subsequent to issuing the Statement of Objections, Microsoft was granted access to file on 23 December
2005. By letters of 24 December 2005 and 2 January 2006 and in a meeting at the Hearing Officer's office
on 6 January 2006, Microsoft requested further access to the Commission's file. This request for access to
file also covered the correspondence between the Commission on the one hand and OTR and the
Monitoring Trustee on the other hand.

By letter of 13 January 2006, I did not accede to Microsoft's request for access to the correspondence with
OTR and the Monitoring Trustee. Following detailed correspondence with Microsoft on the issue, I consid-
ered this correspondence to be internal. However, I checked carefully whether access to the items of the cor-
respondence could have been necessary for the adequate understanding of the methodology or the proper
technical verification of the Trustee's report or otherwise indispensable for Microsoft's defence. As this could
not be excluded for a ‘Sufficiency Test’ undertaken by the Monitoring Trustee, I decided to grant access to
this document. Furthermore, in order to allow Microsoft to verify the Commission services' selection of
accessible documents, I ensured that Microsoft was provided with a descriptive list of all documents yet
undisclosed which were potentially related to the Statement of Objections.

By letter of 17 January 2006, Microsoft requested access to all documents relating to the Commission's
contacts with the four companies that had replied to the Commission's market test (Novell, IBM, Oracle and
Sun) as well as any other third party that the Commission has dealt with in this context. Although these
third parties' submissions had been classified confidential in the first place, all information providers waived
their right to confidentiality with regard to their documents on the list provided to Microsoft. Accordingly,
the documents were made accessible. As some of the waivers were explicitly made on the condition that
Microsoft would not disseminate the information to persons other than Microsoft's counsel or staff directly
connected with the present, I informed Microsoft accordingly. Subsequently, some information providers
complained that Microsoft had misused the information for purposes other than Microsoft's defence in the
current proceedings, in particular by presenting the information on Microsoft's webpage. Microsoft was
given the opportunity to comment on these complaints. Finally, I also granted access to one piece of cor-
respondence that OTR and the Monitoring Trustee had had with third parties.

By letter of 2 March 2006 to me, Microsoft requested access to any material that information providers,
notably Sun, IBM, and Oracle had submitted directly to the Trustee and OTR. Although these documents
were not in the Commission's file at the time of Microsoft's request, the relevant Commission services
agreed to request such correspondence from the Trustee (OTR having informed the Commission that no
written exchanges with third parties existed). Apart from a few documents which were considered confiden-
tial and unrelated, Microsoft was provided with this information.

By letter of 22 March 2006, Microsoft requested access to answers that the Commission services had
received from third companies in response to Article 18 requests. I ensured that access was provided as
soon as the third parties' confidentiality requests had been addressed. In the same letter, Microsoft requested
access to the correspondence between the Commission and its new expert, TAEUS. As I considered this cor-
respondence to be internal, I did not accede to Microsoft's request. However, I verified that the pieces of cor-
respondence were not indispensable for verifying the technical correctness of the reports drawn up by
TAEUS or to understand the methodology used. Microsoft also assumed that there was further correspond-
ence between the Commission services and interested third parties. I informed Microsoft that this was not
the case.

By letter of 23 May 2006, Microsoft requested access to further correspondence between the Commission
on the one hand and the Trustee and TAEUS on the other and requested access to an updated list of
communications between the Commission and third parties and copies of the non-confidential versions of
such communications.

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In my response of 2 June 2006, I reaffirmed my position that Microsoft was not entitled to access the
internal correspondence between the Commission on the one hand and TAEUS or the Trustee on the other
hand. However, I verified carefully that the correspondence did not contain items which are indispensable
for Microsoft's defence. Furthermore, I ensured that Microsoft was sent an updated list of communications
between the Commission and third parties and with a full copy of the communications that were not confi-
dential but related to the objections raised against Microsoft in these proceedings.

The Oral Hearing

In their submission of 15 February 2006, Microsoft requested a public oral hearing.
In my letter of
23 February 2006, I pointed out that, according to the clear wording of Article 14(6) Regulation (EC)
No 773/2004, oral hearings could not be public. As this provision was not only in Microsoft's interest, but
also in the interest of other participants in the hearing and in the interest of the procedure (inter alia to
maintain the serenity of the debate), I took the view that Microsoft's request could not allow me to depart
from a long-standing rule which had ensured that oral hearings have taken place in a constructive and
productive atmosphere over the past 40 years.

As I rejected Microsoft's request for a postponement, the oral hearing took place on 30 and 31 March
2006.

In addition to Microsoft, nine interested third parties attended the Hearing and gave presentations.

No constraints were placed on Microsoft as to the scope of their submissions at the oral hearing. In addition
they were permitted virtually all their requested speaking time. Given the number of third parties involved,
some were required to reduce their initial speaking time requests. An overall balance was maintained
between Microsoft and third parties. Microsoft was permitted to respond to third party comments at the
final stage of the hearing.

The oral hearing was essentially held on the basis of the information provided by Microsoft on 26 December
2005 (third version of the Technical Documentation). However, I did not intervene when Microsoft's fourth
version of the Technical Documentation submitted on 30 January 2006 was addressed as this submission
had been touched upon in the TAEUS report attached to the Commission's letter of facts of 10 March
2006.

The draft final decision

In my view, the draft final decision contains no elements of law that had not been set out in the Statement
of Objections and no elements of fact that had not been set out either in the Statement of Objections or in
the letters of facts.

In the light of the above, I consider that the right to be heard of Microsoft and of the third parties has been
respected in the present case.

Brussels, 3 July 2006.

Karen WILLIAMS