EU hits Microsoft with new penalty fines

The EU’s competition watchdog has hit Microsoft with a €280.5m penalty and threatened a new daily €3m fine unless the software giant complies with Brussels rulings.

The unprecedented new fine represents a €1.5m daily bill, for non-compliance, between December 16 2005 and June 20 2006, with a European commission decision against Microsoft.

In March 2004 the commission fined Microsoft a record €497m for abusing its dominant market position and ordered it to make information available to its rivals about its Windows operating system that would allow greater interoperability between servers.

Daily penalties could double by the end of July unless the US software company hands over information on server codes to an independent EU-appointed trustee.

European competition commissioner Neelie Kroes insisted that she had been lenient – imposing a fine under the originally threatened level of €2m a day.

“Microsoft did not even come close to providing complete and accurate specifications. Microsoft therefore remained in breach of the commission decision and the commission had no option but to impose a penalty payment on Microsoft,” she said on Wednesday.

“The fine is a substantial amount of money. The commission has shown restraint in setting the level of the fine, seeking to do no more than is necessary to induce Microsoft to comply with the commission’s decision.”

Kroes has dismissed Microsoft’s claims that the commission has been unclear about compliance demands for documentation.

“I don’t buy Microsoft’s line that they did not know what was being asked of them because the March 2004 decision is crystal clear,” she argued.

“The decision states that they have to provide complete and accurate specifications that will allow the development of interoperable products. In the period covered by today's decision, Microsoft's documentation fell significantly short of this requirement.”

But Kroes has signalled that Microsoft is getting there before a July 24 delivery deadline – hinting that with an extra effort the IT giant can avoid €3m a day penalties.

She praised an “extremely good job” by Microsoft and announced that the commission would review progress “a couple of months from now”.

“What they are doing is constructive but not quite there,” she said. “Why wait this long? Why not do it earlier?”

Microsoft has responded to the fines by announcing another legal challenge in the EU courts – a legal case against the original Brussels 2004 ruling is still pending.

“We have great respect for the commission and this process, but we do not believe any fine, let alone a fine of this magnitude, is appropriate given the lack of clarity in the commission’s original decision and our good-faith efforts over the past two years.”

We will ask the European courts to determine whether our compliance efforts have been sufficient and whether the commission’s unprecedented fine is justified,” said Microsoft general counsel Brad Smith.

The Association for Competitive Technology (ACT) has also questioned the commission’s latest move.

ACT president Jonathan Zuck told TheParliament.com that Microsoft’s rivals, such as Red Hat or IBM, were demanding codes despite failing to accomplish interoperability between their own products.

“It is a little a bit disingenuous to criticise Microsoft for failing to provide information. The people, Microsoft’s rivals, who want this documentation have no incentives to say information is sufficient,” he said.

“The European antitrust approach is appears to benefit competitors, not consumers, at the expense of intellectual property.”

• Previous article
• Next article