- Title: VARIOUS: European Commission fines Microsoft 281 million euros for non-compliance
- Date: 12th July 2006
- Summary: BRAD SMITH, MICROSOFT VICE PRESIDENT AND GENERAL COUNSEL, INSIDE COURT ROOM
- Embargoed: 27th July 2006 13:00
- Topics: European Union,Economic News
- Reuters ID: LVA7VPW6E2VCW61HKIA7SXYT7Z8W
- Story Text: The European Commission fined Microsoft 280.5 million euros (357.3 million US dollars) on Wednesday (July 12) to punish its failure to comply with a landmark 2004 antitrust ruling.
"The Commission has today fined Microsoft a total of 280.5 million euros for its failure to comply with the march 2004 decision as regards the requirement to provide complete and accurate interface specifications so as to allow other companies to make their products interoperable with Microsoft's PCs and servers. The fine corresponds to 1.5 million euros per day," Competition Commissioner Neelie Kroes said.
The tough new penalty is the first of its kind and comes on top of a record 497 million euro fine the Commission imposed on Microsoft in March 2004 for abusing its dominant position.
The fine covers the period from Dec. 16 last year, the deadline set by EU regulators for Microsoft to make available key information to rivals, to June 20. It was computed by multiplying 187 days of violations by 1.5 million euros per day.
Kroes said Microsoft still had not put an end to its "illegal conduct" and that she had no alternative but to levy penalty payments for "continued non-compliance". She added that
The fine fell short of a possible maximum 2 million euros per day. If Microsoft fails to comply with the Commission ruling by July 31, it would face a maximum possible fine of 3 million euros per day.
"Should Microsoft not comply with this obligation to provide complete and accurate specifications at an appropriate level of remuneration then with the effect from 31st of July, the potential fines will be raised from 10 million (she means 2 million) euro per day to 3 million euro per day" Kroes said.
Microsoft says it has made huge efforts to comply with the Commission's 2004 ruling and has 300 people working to meet the EU executive's requirements by July 18. It calls the fine unjustified, but says that will not slow its effort to comply.
In 2004, the Commission ruled Microsoft squeezed out rivals by withholding information that would help them make server software that could run as smoothly on Microsoft's ubiquitous Windows operating system as its own server software does.
Kroes showed a graph to the journalists to illustrate Microsoft's dominance adding that some of the competitors, with less than 10 percent share, were on their way out"
"A couple of competitors of Microsoft the Netware, Linux, Unix and others, they are all with lower than 10 percent losing market share, by the way, Netware is losing market share, compared 2002 to 2005," Kroes said.
The Commission had ordered Microsoft to provide that information by June 2004.
But Microsoft's offerings failed to meet its standards. One of the company's remedies was judged by a special Commission representative "fundamentally flawed".
Kroes also said that Microsoft must take into account the EU's 2004 antitrust ruling when it launches its new Vista operating system next year.
"The general principle of the 2004 decision when designing Vista has to be avoiding those problems that we are facing now with this situation so I'm consistent with my philosophy and we are absolutely crystal clear what its all about so Microsoft is aware of it," she said.
She said she had written to the U.S. software company two months ago warning that the new product, the next major development of its ubiquitous Windows platform, must be consistent with the precedent set by the EU.
Kroes also suggested that the need to comply with EU rules was one reason why Microsoft had delayed the launch of Vista from this year into 2007.
In response Brad Smith, Microsoft Vice President and general counsel, was bullish. He said: "Obviously we disagree about the last two years, but we're encouraged by the Commission's comments that our recent work is extremely good. In our view this issue has never been about compliance, it's about clarity. Having got clarity from the Commission in April we've met every deadline since then and our top priority is to meet the final deadline two weeks from now."
The following is a chronology of European Commission enforcement efforts against Microsoft since the EU executive's landmark antitrust decision on the software company in 2004:
- March 24, 2004: European Commission fines Microsoft a record 497.2 million euros ($635 million) for competing unfairly, orders it to offer Windows operating system without audiovisual software.
Microsoft told to disclose information so rival server software firms can make programmes that are as compatible with Windows as Microsoft's own server software.
- June 8: Microsoft appeals against Commission ruling to EU Court of First Instance in Luxembourg in a case expected to take years.
- June 25: Microsoft asks court to suspend sanctions until case is completed.
- Sept. 30-Oct. 1: Court of First Instance holds two-day hearing on Microsoft request for suspension.
- Dec. 22: Court rejects application to suspend remedies.
- July 28, 2005: Commission decides to establish monitoring trustee, tasked with supervising the carrying out of sanctions against Microsoft.
- Oct. 5: Commission chooses software expert Neil Barrett, one of three nominations by Microsoft, as trustee for Microsoft remedies.
- Nov. 10: Commission warns Microsoft to comply with sanctions by Dec. 15 or face fines of up to 2 million euros daily for what it calls royalty overcharge and bad documentation. The warning remains confidential until December.
- Dec. 15: Microsoft submits information on royalty levels it charges rival makers of server software to connect their products to Windows.
- Dec. 22: Commission issues statement of objections, the first step towards fining the company for bad documentation on interconnection.
- Jan. 25, 2006: Microsoft offers to open some of its source code -- a blueprint -- for work group servers to licensees.
- Feb. 15: Microsoft replies to statement of objections.
- March 10: Commission says Microsoft responses continue to be "entirely inadequate" on documentation.
- March 30-31: Closed administrative hearing takes place on the proposed fines.
- April 24-28: Open court hearing on Microsoft challenge filed on June 8, 2004, takes place at Court of First Instance.
- May 17: U.S. court, Department of Justice say European approach working better than American approach, worth emulating.
- July 3: EU member state advisory committee recommends fining Microsoft.
- July 4: South Korean court rejects Microsoft request to suspend antitrust agency order there that it must unbundle Media Player and messenger software from Windows.
- July 10: Member state advisory committee set to endorse specific fine.
- July 12: European Commission scheduled to impose new fine, and expected to raise fines for any further lack of compliance. ($1=.7829 euro)
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