New EU fine brings Microsoft bill to 1.7 billion

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The Commission on Wednesday (27 February) imposed a new record fine of 899 million euros on Microsoft for abusing its dominant position, raising the bill charged to the Redmond software giant thus far to almost 1.7 billion euros.

Competition Commissioner Neelie Kroes has decided once more to act against Microsoft because of the “unreasonable” fees imposed by the company between 2004 and 2007 on its software licenses and for the release of information on its products. Brussels had specifically asked Microsoft to provide technical information to its competitors in order to allow them to build compatible software.

Microsoft had demanded a royalty rate of 3.87% on product revenues for patent licenses and of 2.98% for information licenses. Despite the first Commission decision of March 2004, Microsoft kept prices unmodified until 21 May 2007 when they were reduced. However, the Commission considers that the Redmond company has only been in line with its demands since 22 October 2007, when it set the price for access to interoperability information at a flat fee of €10,000.

“The Commission’s fine is a reasonable response to a series of quite unreasonable actions,” commented Commissioner Kroes recalling “Microsoft’s record of non-compliance”. Indeed, with the fine received in 2006, the IT giant has been the first company in 50 years to be fined for not abiding to a Commission decision. In this particular case, Brussels is condemning the insufficient information provided by Microsoft to competitors in order to close the gap opened by the first Commission decision of 2004.

In addition, Kroes stressed that there are two ongoing investigations to verify anti-competitive practices carried out by Microsoft in other markets. “These investigations are separate and continuing,” said the Commissioner at a press conference in Brussels.

And problems are probably not over for the US software giant. Last January, the Commission decided to open two antitrust enquiries to verify the interoperability of core Microsoft products, including Office Suite, and the legality of bundling the browser Internet Explorer to the Windows operating system.

Positions

Explaining the measures adopted, Commissioner Kroes  commented: "It gives me no pleasure to be here again announcing such a fine; nor to see that a company flouted the law when it had many opportunities to choose other courses of action. But given the nature of Microsoft's non-compliance, considering both its effects and its duration, today's fine is proportionate and necessary".

"We are reviewing the Commission's action. The Commission announced in October 2007 that Microsoft was in full compliance with the 2004 decision, so these fines are about the past issues that have been resolved. As we demonstrated last week with our new interoperability principles and specific actions to increase the openness of our products, we are focusing on steps that will improve things for the future," reads a statement issued by Microsoft.

Thomas Vinje, legal counsel and spokesman for ECIS, the association that brings together the biggest of Microsoft's competitors including IBM, Sun Microsystems, Adobe, Nokia and Oracle, welcomed the Commission's latest move: "ECIS regrets that Microsoft chose to subject itself to fines rather than end its anti-competitive practices and permit merit-based competition in the marketplace. Commissioner Kroes is to be commended for her perseverance over the last three years in the face of Microsoft's footdragging and appeals to the Court of First Instance".

Background

After a five-year investigation, the European Commission on 24 March 2004 concluded that Microsoft had violated EU competition rules by exploiting its near monopoly in the market for computer-operating systems via its Windows software.

The group was suspected of trying to achieve a controlling position on the related market of workgroup server-operating systems (which allow connections among PCs and other office machines such as printers) and on the media player market by bundling its own Windows Media Player to the Windows operating system.

At the time, Brussels imposed remedies and a fine of €497.2 million on Microsoft. But, after two years, on 12 July 2006, the Commission noticed that the IT giant had not abided by the remedies requested. In particular, Microsoft did not make available "on reasonable terms" to competitors the software secrets for the products covered by the case. A new €280.5 million fine was imposed.

On 17 September 2007, the European Court of Justice upheld the Commission's decision to condemn Microsoft for abuse of its dominant position. It ruled that Microsoft's behaviour reduced competition in the markets concerned, thereby preventing innovation and choice to the substantial detriment of consumers.

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