EU gets set to fine Microsoft millions

Antitrust regulators also are poised to demand changes in Windows

March 16, 2004|By COX NEWS SERVICE

LONDON - Europe's antitrust watchdogs showed their teeth yesterday, unanimously approving a draft ruling that would force Microsoft Corp. to make major changes in its software and business practices.

The vote by representatives of 15 European Union governments clears the way - unless talks produce a last-minute settlement - for the European Commission to declare next week that the world's largest software company is an abusive monopolist. The commission is the EU's administrative arm.

Such a ruling could affect Microsoft's bottom line. The company sold $3.4 billion in Windows software in Western Europe in 2002, almost a third of Microsoft's worldwide sales. A far-reaching order from the EU could result in a fine of up to $3 billion.

It also could set new ground rules as the personal computing industry tries to carve out a bigger role for itself in the emerging age of digital entertainment.

The draft ruling prepared by Mario Monti, the European Commission's top antitrust regulator, is expected to require Microsoft to provide computer makers with two versions of Windows - one like current versions that have its Media Player for music and video built in, and another one that doesn't.

That would free the computer makers to sell versions of Windows with RealNetworks Inc.'s RealPlayer or other rival audio-visual software. Microsoft's Windows runs 90 percent of the world's personal computers.

The EU draft ruling also would compel Microsoft to release more Windows programming code in the interests of improving "interoperability" with competing networking software made by Sun Microsystems Inc. and others.

Given the size of the EU market, such an order could have global implications for Microsoft, which argues that its practice of adding new features to Windows benefits consumers.

The EU antitrust regulators are scheduled to meet Monday for a final day of talks that are expected to focus on the size of a fine against Microsoft that could be anywhere from $100 million to $3 billion. The commission is to meet March 24 to issue the final ruling.

A Microsoft spokesman said yesterday's decision was fully expected, and that the company would continue trying to negotiate a settlement with the EU.

"We continue to remain actively engaged with the European Commission in hopes of finding an amicable resolution to these issues," Microsoft spokesman Jim Desler said in a telephone interview from Brussels, Belgium.

Microsoft has argued that playing audio and video has been an integral part of the Windows operating system since the early 1990s, and should remain integrated with the software.

If no settlement is reached, Microsoft has the option of appealing the ruling to the European Court of First Instance in Luxembourg and asking that any sanctions be suspended pending the appeal, which can take years to resolve.

The software giant's critics hailed the approval of the draft ruling.

"Microsoft has for too long stifled product innovation by squelching its competitors, and hopefully this problem will now start to be corrected," said Mark Cooper, research director of the Consumer Federation of America in Washington.

"It's very clear that the liability case against Microsoft is very solid and strong, and so it's not surprising that the member states agreed with the commission," said Ed Black, president of the Computer and Communications Industry Association in Washington, a trade group representing many of Microsoft's rivals.

Black believes Microsoft's dealings with antitrust regulators will continue long after a final ruling is issued in the European case.

"Microsoft has never changed its anti-competitive behavior and I don't believe even this European ruling will change the company's attitude," he said. "I expect the United States and Japan and even the EU to all come across more reasons in the future to proceed against Microsoft."

In many ways, the European case is a repeat of the Internet browser case in which U.S. courts found Microsoft guilty of unlawful behavior. Microsoft reached a settlement with the U.S. government in 2001 that allowed it to keep its Internet Explorer in Windows, but with conditions.

Microsoft officials have said that the U.S. settlement should appease EU concerns related to the company, but some consumer advocates disagree.

"Thank God the Europeans understand that the U.S. settlement doesn't get the job done," Cooper said.

The Associated Press contributed to this article.

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