Microsoft Hit With $357M E.U. Fine

The European Commission has fined Microsoft 280.5 million euros (US$357 million) for failing to comply with the terms of a March 2004 antitrust judgment against it, the commission said on Wednesday.

Microsoft has already paid a 497 million euro fine as a result of the judgment, in which the commission found that Microsoft had used its near-monopoly in the PC operating systems market to gain advantage in the markets for work group server operating systems and media players.

At the time, the commission 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 certain communication protocols used by its server products.

The 280.5 million euro fine announced Wednesday is to punish the company for failing to provide those technical details in a timely manner. If Microsoft continues to fail to comply, the commission will increase the fine to 3 million euros per day, it said.

Microsoft immediately dismissed the decision as inappropriate given its “good-faith efforts” to comply with the judgment over the past two years. Its general counsel, Brad Smith, called the level of the fine unjustified and said Microsoft will appeal to the European courts to determine whether the fine is justified.

“The fine announced today is larger than the fines the commission has imposed for even the most severe competition law infringements, such as price-fixing cartels,” he 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 U.S. to ship actual products, we do not believe this fine is justified.”

The company has called a news conference for early Wednesday afternoon to discuss the decision in more detail.

The commission 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 commission 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 commission 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 commission by July 18, according to a timetable the two parties agreed on with the independent monitoring trustee appointed to oversee matters.

The commission had previously threatened fines of up to 2 million euros a day until all the required information about the communications protocols had been supplied. The 280.5 million euro figure is based on a fine of 1.5 million euros per day, for the period from Dec. 15 to June 20.

On Nov. 10, the commission warned Microsoft that it had not complied with two elements of the antitrust judgment, and would be fined 2 million euros a day if it did not comply by Dec. 15.

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

If Microsoft has still not complied by July 31, then the commission could decide to double the fine to 3 million euros per day.

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.

-Paul Meller and Peter Sayer, IDG News Service (Brussels Bureau)

Related Links:

• E.U. to Raise Microsoft Daily Fine Cap to $3.8M

• Microsoft Could Face E.U. Fines of $2.5M a Day

This article is posted on our Microsoft Informer page. For more news on the Redmond, Wash.-based powerhouse, keep checking in.

Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.