July 12, 2006

EU fines Microsoft $357.3 mln for defiance

By David Lawsky and Sabina Zawadzki

BRUSSELS (Reuters) - European Union regulators fined
Microsoft 280.5 million euros ($357.3 million) on Wednesday for
defying a 2004 antitrust ruling, and warned the company to
comply or face bigger fines from next month.

The tough new penalty is the first of its kind and comes on
top of a record 497 million euro fine the Commission imposed in
its landmark antitrust decision against Microsoft in March

"The EU Commission cannot allow such illegal conduct to
continue indefinitely. No company is above the law. Each and
every company, large or small, operating in the EU must abide
by EU law," Competition Commissioner Neelie Kroes told

The Commission required Microsoft to provide technical
information to rival server software makers after it found the
company abused the dominance of it Windows operating system and
squeezed out competitors.

"Microsoft did not even come close to providing adequate
information," Kroes said.

The fine covers the period from December 16 to June 20 at
1.5 million euros daily. It fell short of a possible daily
maximum of 2 million euros. Microsoft faces a further fine of
up to 3 million euros a day if it still does not comply by July

The move signals the Commission's determination to force
the software giant to obey its order and a loss of patience
after the company had two years to comply and used virtually
every available legal and court procedure to spin out the

The Commission's hard-line approach contrasts with that of
the United States, which in 2000 made similar findings against
Microsoft but is still awaiting technical documents from the
company as ordered by the U.S. Justice Department in 2002.

By May this year the process was so troubled that Microsoft
and the court started over again in a process that took the cue
from what a U.S. judge called "the European Commission's
direction." Kroes noted this new U.S. approach on Wednesday.


Microsoft said it has made massive efforts to comply with
the Commission's 2004 ruling and now has 300 people working to
complete its package by an agreed deadline of July 18.

It called the fine unjustified, but said that will not slow
its effort to comply. Microsoft, which has appealed against
every ruling against it so far by the Commission, said on
Wednesday it will appeal against this decision too.

"Despite these fines, Microsoft remains totally committed
to full compliance with the Commission's 2004 decision," the
company said in a statement.

The court is already reviewing an underlying challenge by
Microsoft to the original Commission decision, and conducted a
hearing in April on it.

After years of investigation, the Commission found in 2004
that Microsoft used the near-monopoly power of its Windows
operating system to harm competitors making workgroup servers,
which run printing and sign-on services in offices.

The Commission ordered Microsoft to give rivals the
information needed so their servers could compete on a level
playing field with Microsoft's own. Microsoft must help its
rivals interconnect smoothly with Windows.

In the decision that was intended to set a precedent, it
also found that Microsoft harmed competitors by illegally
bundling its Windows Media Player with the operating system,
leaving consumers with little incentive to buy rival software
to watch films or listen to music.

The bundling issue poses concerns already voiced by Kroes
about Microsoft's next operating system, Vista, which could
package Internet search functions or software that creates
fixed documents and thus threaten Google and Adobe.

"The launch next year (of Vista) will hopefully be in a
shape in which all those 2004 decision items are taken into
account," Kroes said.