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Microsoft meets EU antitrust deadline

Workgroup Server licence terms under spotlight

Microsoft said it’s met the European Union antitrust agency's deadline for responding to allegations that the company overcharges for the information rivals need to make their products work smoothly with Windows.

"Microsoft confirmed that it has submitted today its response to the European Commission's Statement of Objections (SO) of March 1, 2007 concerning the pricing of licences for the Workgroup Server Protocol Program (WSPP)," the company said.

On 1 March, the EU's Competition Commission, which is led by Neelie Kroes of the Netherlands, turned up the heat in its 14-year war with Microsoft by threatening new fines of up to $4 million a day. Then, the commission filed an official statement of objections that said Microsoft's assembled protocol documentation lacked "significant innovation," which in turn made the prices the company wanted to charge competitors "unreasonable”.

According to reports earlier this month in the Financial Times, the commission's technical adviser, Neil Barrett, had told the EU that even an average royalty rate of 1 percent would be "unacceptable”, and that 0 percent would be "better”. Microsoft currently charges as much as 5.95 percent of a company's server revenue as a licence fee, the Times said.

Originally, the commission gave Microsoft until 3 April to respond to its objections, but late last month it extended the deadline to Monday at Microsoft's request.

Before the extension, Kroes had called Microsoft's behaviour "unacceptable" in a speech in front of the EU Parliament. Last Friday, at an antitrust-related meeting of American Bar Association lawyers, Kroes said, "We have never, ever before encountered a company that has refused to comply with commission decisions." She went on to say that her commission might have to reconsider how it dealt with companies that ignored its orders. "We learned [from this that] we may have to look for a more effective remedy," she said.

Microsoft did not take that sitting down. Today, a spokesman repeated a phrase company executives have used in the past when talking about the EU and what the software vendor sees as murky orders.

"We have done everything humanly possible to comply with a decision that is unfortunately very unclear and undefined, and we will continue to work with the commission in every way that we can," the spokesman said.

Although Microsoft is entitled to an oral hearing on the EU's objections to its protocol licence pricing - something it has taken advantage of before - the company said today that it would forswear that right.

"We continue to seek to resolve these recent issues," said Brad Smith, Microsoft's general counsel. "We need greater clarity on what prices the commission wants us to charge, and we believe that is more likely to come from a constructive conversation than from a formal hearing."

The EU commission acknowledged that it had received Microsoft's response, as well as the fact that the company did not request an oral hearing. "The commission will now consider Microsoft's reply and decide whether to impose a daily penalty on Microsoft for failure to comply with the March 2004 decision," the commission said in a statement.

The EU-Microsoft case, which began in the 1990s, resulted in a $613 million fine in 2004; the company was also ordered to share several server protocols with competitors as compensation for what the EU said were Microsoft's monopolistic practices. Last July, the commission added another $373 million in fines, saying Microsoft was dragging its feet in preparing the documentation. Microsoft has appealed both fines in EU courts.

The $4-million-per-day fine, if levied by the EU, would be retroactive to July 2006.


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