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Microsoft fined €280.5m by EU

Failure to comply

The EC (European Commission) has fined Microsoft €280.5m (about £194m) for failing to comply with the terms of a March 2004 antitrust judgement against it, the EC said today.

Microsoft has already paid a €497m (£344m) fine as a result of the judgement, in which the EC found that Microsoft had used its near-monopoly in the PC OS (operating system) market to gain advantage in the markets for work group server OSs and media players.

At the time, the EC also ordered the company to release a version of Windows XP without a built-in media player, and to provide its competitors with technical details of communication protocols used by its server products.

The €280.5m fine announced today is to punish the company for failing to provide those technical details in a timely manner. If Microsoft continues to fail to comply, the EC will increase the amount of the daily fine to €3m (£2.1m) per day, it said.

"Microsoft says it's committing huge resources to tackling this problem. It's a shame they didn't do so two years ago," said Neelie Kroes, competition commissioner at the EU (European Union).

Microsoft immediately dismissed the decision as inappropriate given what it called its "good-faith efforts" to comply with the judgement. General counsel Brad Smith called the level of the fine unjustified and said Microsoft would appeal to the European courts to determine whether its compliance efforts have been sufficient and if the fine is justified.

"The fine announced today is larger than the fines the EC has imposed for even the most severe competition law infringements, such as price-fixing cartels," Smith said in a statement. "When you consider Microsoft's massive efforts to comply with this ruling, and the fact that more than a dozen companies are already using similar documentation provided in the US to ship actual products, we do not believe this fine is justified."

He reiterated Microsoft's position that the EC's original decision lacked clarity.

The EC clearly had not accepted that argument, however.

"I don't buy Microsoft's line that they didn't know what the EC wanted. It was clear. Microsoft's documentation fell significantly short of the requirements," Kroes said.

Asked how the decision affects Windows Vista, Kroes said the forthcoming OS must "avoid the problems highlighted in the 2004 decision".

"Hopefully when Vista launches next year, all the issues of the 2004 ruling will have been taken into account," she said.

The EC initially gave Microsoft 120 days to disclose details of the software interfaces used by its server products to communicate with the desktop versions of Windows, so that competing vendors could build compatible systems. Progress was slow, and in March last year, and then again in June, the EC threatened the company with additional fines if it didn't fully comply with the ruling.

Microsoft succeeded in pushing back the deadline numerous times as negotiations continued, but the EC remained unsatisfied with Microsoft's progress, notably in documenting its software interfaces.

Microsoft is due to submit the final batch of technical documentation required by the EC by 18 July, according to a timetable the two parties agreed with the independent monitoring trustee appointed to oversee matters.

"Nearly 50 percent of the documentation is there. Now we must check if the specifications are correct," Kroes said today. She said she felt sure that the company would not ignore the daily fines, and said it has been making "constructive efforts" to comply since 20 June.

The EC had earlier threatened fines of up to €2m (£1.4m) a day until all the required information about the communications protocols had been supplied. The €280.5m figure is based on a fine of €1.5m (£1m) per day, for the period from 15 December to 20 June.

On 10 November, the EC warned Microsoft that it had not complied with two elements of the antitrust judgement, and would be fined €2m a day if it did not comply by 15 December.

More recently, the EC determined that as of 20 June, Microsoft had still not complied with one of those obligations, supplying the documentation. This failure eliminated the effectiveness of the remedy, the EC said, and so it had decided to impose a larger part of the daily penalty payment of €2m.

If Microsoft has still not complied by 31 July, then the EC could decide to increase the fine.

In a separate action, Microsoft has also appealed against the antitrust ruling itself. The European Court of First Instance in Luxembourg finally heard that appeal in late April, and is now considering its decision.


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