Ouch. Microsoft’s bruising nine-year battle with the European Commission has ended in stinging defeat. The Court of First Instance ruled firmly against the software giant’s legal appeals and backed the Commission on every issue of substance. There seems little point in Microsoft taking the main elements of its case any further.

What does the defeat mean? First, the Commission has emerged with strong precedents, when it comes to dominant technology companies, on the key issues of interoperability and bundling of new products. That is likely to mean more pressure on Microsoft itself. The Commission will continue to push for Microsoft to ensure interoperability for rival server products with its Windows operating system. It might also be emboldened to pursue more vigorously a complaint from rivals about Microsoft’s dominant – and highly lucrative – Office software.

More broadly, though, the ruling appears to cement the Commission’s position as regulator-in-chief of the global technology industry. It has taken a more combative approach than US regulators in recent years. The European market is so important – technology companies clearly have to do business there. And the global nature of the industry means decisions in Europe have ramifications for products around the world.

A rather strange situation is developing. Europe, with a few notable exceptions, has failed to produce serious competitors to America’s technology giants. Instead it has become a check on the dominance of US companies as a regulatory jurisdiction.

A transatlantic gap has developed between regulators when it comes to enforcement and philosophy. That could change under a new US administration. But for now, technology giants with strong market positions (such as Apple with iTunes/iPod) or those pursuing controversial deals (such as Google/DoubleClick) may fear an emboldened Brussels regulator far more than the authorities in Washington.

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