EU levies $357 million fine against Microsoft

Company accused of not explaining technical language

July 13, 2006|By CHARLES PILLER | CHARLES PILLER,LOS ANGELES TIMES

A $357 million fine levied against Microsoft Corp. yesterday reflects the European Union's frustration over the software giant's failure to comply with key provisions of a 2004 antitrust order.

The fine was the first for antitrust noncompliance in the 49-year history of the EU and stems from the company's reluctance to share information about its flagship Windows operating system.

Yesterday's penalty follows a record $613 million fine the company paid in 2004 for violating antitrust rules and demonstrates how decisively European regulators have taken over the lead in trying to temper Microsoft's overwhelming market power.

The EU Competition Commission said the software giant would face additional fines of $3.82 million a day, beginning July 31, unless it provided "complete and accurate technical specifications" for software developers who create products that must operate with Windows on PCs and server computers that operate networks.

Some analysts doubted whether fines alone will change Microsoft's tactics. Based on Microsoft's 2005 earnings, yesterday's fine amounts to about 11 days' worth of profits.

But Andrew Gavil, a law professor at Howard University, predicted that the ruling foreshadows scrutiny of Vista, the next major revision of Windows, due out early next year. "The question is, will Microsoft bend its knee and realize that, as a monopoly, it must fundamentally alter its business strategy," based on adding new features or products to Windows while keeping other companies in the dark, he said.

EU Competition Commissioner Neelie Kroes hinted yesterday that European antitrust regulators would continue to pressure the Redmond, Wash.-based company.

"It is now more than two years since the commission's March 2004 decision that found Microsoft to be in violation of the EU's antitrust rules by abusing its dominant market position," Kroes said.

"The European Commission cannot allow such illegal conduct to continue indefinitely," Kross said.

Microsoft General Counsel Brad Smith said the company would appeal to the European court system. The company had already appealed the original antitrust decision, and a ruling from the Court of First Instance, equivalent to a U.S. court of appeal, is expected in about six months.

The Commission's 2004 ruling required the company to share technical details of Windows with its software rivals. It was intended to mitigate Microsoft's advantage creating products that work smoothly with Windows, which is used on more than 90 percent of the world's PCs.

Microsoft said that once a clear definition of requirements was received in April, it deployed hundreds of technical experts to comply, and will meet the commission's July 24 deadline for delivery of the final documents.

"It is hard to understand why the commission is imposing this enormous fine when the process is finally working well and the agreed-upon finish line is just days away," Smith said.

Kroes countered that yesterday's fine reflected a long-standing concern by the EU that Microsoft has been dragging its heels.

Some industry experts, though, regard the EU move as little more than protectionism.

"If Microsoft were a European company, they'd be getting subsidies from all the governments," said Jeff Tarter of the industry newsletter Softletter.

Microsoft shares fell 42 cents to $22.68 yesterday.

Charles Piller writes for the Los Angeles Times.

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