Microsoft Faces EU's Wrath
July 12, 2006
The European Commission stepped up the pressure on Microsoft Wednesday to respect a 2004 antitrust ruling, by slapping the software maker with a new fine of 280.5 million euros or 1.5 million euros per day, backdated to Dec. 15 last year. That is the day Brussels ended its grace period for Microsoft to comply with demands to reveal source code to competitors.
The fine is not as high as the possible 400 million euro penalty that could have been imposed, but the Commission could slap future daily fines that run as high as three million euros per day, if Microsoft still has not satisfied the EU regulators' demands by the end of the month.
It is not the first time that the American software maker based in Redmond, Washington has had to dig deep into its pockets to pay the EU. In March 2004, the Commission levied a record fine of 497 million euros on the company for its failure to comply with orders to reveal source code to competitors. The company paid that penalty in July of that year.
Long investigation finds Microsoft in violation
The current case is a continuation of the quarrel whose roots date back to Dec. 1998. At that time, the US software group Sun Microsystems filed a complaint against Microsoft with the EU. Sun had alleged that Microsoft was elbowing it out of the market by not giving access to develop programs that could communicate with Microsoft products.
Over a year later, in Feb. 2000, Brussels launched an investigation that found Microsoft had broken EU law by using a quasi-monopoly in personal computer operating systems to thwart rivals.
In addition to fining Microsoft in March 2004, the EU ordered the company to sell a version of its Windows operating system without bundling its Media Player software with it. Microsoft was also instructed to divulge the information needed by makers of rival products. Although Microsoft paid the fine, it has fought tooth-and-nail over the information it is supposed to reveal to competitors.
Microsoft appeal trying EU's patience
Microsoft's two years of defiance has not sat well with EU Competition Commissioner Neelie Kroes who said on Wednesday that she had "no alternative" but to fine Microsoft.
"No company is above the law. Any businesses operating in the EU must obey EU law," she said.
Microsoft says that it is releasing reams of key computer code needed by programmers of rival products and claims that further fines are unfair. Microsoft also argues that if it is not complying with the decision, it is because the commission was too vague in the 2004 ruling about what the company needed to do.
Even while Kroes was still presenting the fine to the press, Microsoft shot back with plans to appeal in court.
Microsoft general counsel Brad Smith said that "we do not believe any fine, let alone a fine of this magnitude, is appropriate given the lack of clarity in the Commission's original decision and our good-faith efforts over the past two years."
"We will ask the European courts to determine whether our compliance efforts have been sufficient and whether the commission's unprecedented fine is justified," he added.
The Microsoft standoff with Brussels is testing not only EU regulators' patience but also their authority. The company challenged the 2004 ruling in the EU's second-highest court in April, but the judges are not expected to hand down a decision before the end of the year.