EU regulators fine Microsoft $613 million for antitrust abuses

Besides record amount, company faces sanctions aimed at future business

March 25, 2004|By COX NEWS SERVICE

LONDON - The European Commission, which enforces European Union competition law, yesterday slapped Microsoft Corp. with a fine of $613 million, the largest levied against a single company in the EU's history.

The fine is not likely to faze Microsoft, which last month was reported to have $52.8 billion in cash on hand. But other sanctions imposed by the EU "because the illegal behavior is still ongoing" could significantly affect its future business operations.

The world's largest software company vowed to appeal yesterday's ruling that it had illegally abused its "near monopoly" in personal computers, saying the action could "hobble" its Windows operating system and harm consumers.

Bradley P. Smith, Microsoft's general counsel, told reporters the company would appeal to Europe's Court of First Instance in Luxembourg within 70 days. He said it would ask that "at least part" of the ruling be stayed or suspended during the appeal process - which he predicted would take four or five years.

The commission ordered Microsoft to offer, within 90 days, a version of Windows that doesn't incorporate its digital Media Player. Such players are becoming far more important to consumers as music and video become digitized and computers are marketed as "entertainment centers."

The company will be allowed to continue selling a version of Windows bundled with the Media Player, meaning that computer makers will be offered two versions.

The commission also ordered the company to disclose to rivals within 120 days computer coding that will let their products "talk" efficiently to Microsoft's Windows, the operating system that runs more than 90 percent of the world's personal computers.

The commission will appoint a trustee to monitor Microsoft's compliance with the ruling.

"Today's decision restores the conditions for fair competition in the markets concerned and establish clear principles for the future conduct of a company with such a strong dominant position," said European Competition Commissioner Mario Monti.

Monti said he limited the order to Europe "in deference to the competition authorities of the United States and other countries," the Associated Press reported.

Still, the ruling hits Microsoft hard. The company's sales of Windows in Western Europe were $3.4 billion in 2002, almost a third of its worldwide sales.

"If Microsoft's appeals fail, the EU's decision will have a profound impact on the way Microsoft does business in the future," said Laura DiDio, a senior analyst with the Yankee Group in Boston.

"And future pricing strategies will be tricky," she said. "The EU, while not setting prices, also said that Microsoft could not offer PC manufacturers a discount if they opt to purchase the version of Windows bundled with Media Player."

Edward J. Black, president of the Computer and Communications Industry Association in Washington, a trade group representing many of Microsoft's rivals, called the ruling "historic."

He said it would make a "positive impact" on innovation in the marketplace while laying the groundwork for future antitrust cases against Microsoft.

The European media called yesterday "a day of reckoning," but Microsoft said the legal showdown was far from over. Smith, the company's chief counsel, said it was particularly important for the European court to stay the commission's order requiring the offering of a second version of Windows.

"There are a number of technologies in third-party Web sites that rely on Media Player coding to be in the operating system," he said.

Instead of the commission's "unwarranted and ill-considered step," Smith said, consumers would have been better off with a settlement proposed last week under which the company would immediately make available a version of Windows that included Media Player and three competing players.

Smith predicted that the antitrust case in Europe would play out the way a similar case involving the company's Internet Explorer browser did in the United States.

In late 2001, Microsoft agreed to a settlement with the Justice Department after an appeals court overturned part of an antitrust ruling against the company by a trial judge.

"Similarly, I'm hoping we get clarity from the European court this year and then there may well be an opportunity to talk again," he said.

In a conference call with reporters, Microsoft Chief Executive Officer Steven A. Ballmer emphasized that the company would like to settle the case.

Microsoft's stock gained 26 cents to close at $24.41.

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