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updated 4/22/2004 10:58:48 AM ET 2004-04-22T14:58:48

The European Commission's landmark decision against Microsoft last month is out of step with legal precedent, business realities and a US settlement, the company is set to argue in court.

A briefing note the company has circulated to its lawyers and economists, and now made available on its website, it sets out the arguments Microsoft is likely to use in its appeal, due to be lodged in early June. (MSNBC is a Microsoft-NBC joint venture.)

The Commission ruling against the company for abusing its Windows monopoly is set to be published as early as on Thursday but has already been seen by the FT.

The Brussels body says Microsoft choked off competition in the markets for server systems by denying its rivals interface information and illegally "tied" its Media Player program to Windows, reducing demand for rival products.

In its briefing note, Microsoft attacks Brussels' working methods, as well as the conclusions it reaches, at a time when the Commission's competition policy is undergoing important changes.

The company's response accuses Brussels of "seeking to make new law . . . reducing incentives for research and development that are essential to global economic growth".

The Commission decision says: "Microsoft interferes with the normal competitive process which would benefit users in terms of quicker cycles of innovation due to unfettered competition on the merits."

On Wednesday, Mario Monti, competition commissioner, indicated that the Commission would look at producing clear guidelines on how it deals with monopolistic companies.

Mr. Monti would also like to encourage US-style class actions against companies that break EU competition law.

Microsoft argues that the Commission decision requires it "to make available to its competitors well over 100 communications protocols" for which it holds "dozens of patents".

As well as launching an appeal, the group will ask for a suspension of the Commission orders for it to license such information and to offer computer manufacturers in Europe a version of Windows without Media Player. In recent weeks, Microsoft has struck deals with a series of litigators, most notably Sun Microsystems, but it still faces years of legal fights in Europe.

The company says the Commission's stance on sharing information "rests on a very narrow product market definition that bears little resemblance to the real world". It adds that the Media Player decision "dismisses with a single comment the US final judgment [in a separate case] that regulates Microsoft conduct" in this area.

But the Commission decision cites market surveys that indicate users took up Microsoft products despite rating rival products more highly. It also says that it cannot wait till the company's practices have eliminated all competition because "at that point Microsoft could no longer be subjected to any meaningful antitrust remedy".

Copyright The Financial Times Ltd. All rights reserved.

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