EU slaps Microsoft with $1.35 billion fine
This post was updated several times, most recently at 7:40 a.m. PST, with additional reporting provided by CNET News.com's Dawn Kawamoto.
European Union regulators on Wednesday fined Microsoft a record 899 million euros, or $1.35 billion, for failing to comply with sanctions.
The fine specifically addresses sanctions over the pricing structure Microsoft had set for licensing of its interoperability protocols and patents.
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The pricing issue is the last of three parts of the European Commission's historic March 2004 antitrust order, which called for the software giant to provide complete and accurate interoperability information to rivals so their software could work with the Windows operating system, as well as to license the information "under reasonable and nondiscriminatory" terms.
"We always knew the possibility of a fine (over the licensing fee structure) was...there, but no one knew when it would come or how big it would be," said a source familiar with Microsoft's thinking. "Now the other boot has dropped."
In July 2006, the Commission fined Microsoft 280.5 million euros, or $424 million, for failing to comply with the other two parts of its sanctions related to providing complete and accurate interoperability protocol information to rivals. The original decision from 2004 was upheld by the European Court of First Instance last fall.
In addition to the two fines for failure to comply, Microsoft was originally hit with a 497 million euro levy by the Commission for having abused its dominant market position at the time of that order. (The 497 million euros originally was worth $613 million. Today it converts to $752 million.)
The newest fine, announced Wednesday, is the largest ever imposed by the EU upon a single company. In total, the European regulators have fined Microsoft roughly $2.5 billion in the long-running antitrust dispute.
Neelie Kroes
(Credit: European Community)"Microsoft was the first company in 50 years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision. I hope that today's decision closes a dark chapter in Microsoft's record of noncompliance with the Commission's March 2004 decision," EU Competition Commissioner Neelie Kroes said in a statement.
The ruling comes just one week after Microsoft announced a broad interoperability strategy, which included a pledge to not sue open-source developers.
"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," Microsoft said in a statement.
Although Microsoft's announcement and the Commission's fine come within days of each other, one source said the two were not related. Microsoft's announcement last week addressed how the software maker would apply the Court of First Instance's ruling to the rest of its business, according to the source.
In its new order, the Commission specifically said that Microsoft had charged "unreasonable prices for access to interface documentation for work group servers."
According to the EU's ruling, Microsoft initially had demanded a royalty rate of 3.87 percent of a licensee's product revenues for a patent license and a rate of 2.98 percent for a license giving access to the secret interoperability information. In May 2007, following complaints by the Commission, Microsoft reduced its royalty rates to 0.7 percent for a patent license and 0.5 percent for an information license within the EU. Worldwide rates remained unchanged.
On October 22, 2007, Microsoft began providing a license that gives access to the interoperability information for a flat fee of 10,000 euros and an optional worldwide patent license for a reduced royalty of 0.4 percent of licensees' product revenues, the Commission said.
The view from the competition
Microsoft's competitors and adversaries wasted no time in weighing in.
The European Committee for Interoperable Systems applauded the Commission's move.
"Commissioner Kroes is to be commended for her perseverance over the last three years in the face of Microsoft's foot dragging and appeals to the Court of First Instance," Thomas Vinje, ECIS legal counsel, said in a statement.
ECIS, which comprises Microsoft rivals Oracle, RealNetworks, Sun Microsystems, IBM, and others, further characterized Redmond as preferring to pay antitrust fines rather than allowing "merit-based competition" to occur in the marketplace.
Last month, the Commission announced it was initiating a formal investigation into Microsoft, focusing on potential antitrust violations regarding bundling of its products with its dominant operating system.
Browser maker Opera Software had initiated a complaint to the Commission, alleging that Microsoft was violating antitrust laws by tying its Internet Explorer browser to its Windows operating system. Opera highlighted concerns that Microsoft was adding new proprietary technologies into its browser that diminished interoperability with open Internet standards.
As part of its investigation, the Commission said it would also look into a complaint by ECIS. That complaint alleges that Microsoft refused to disclose interoperability information for a broad range of its products, including its Office suite, server-related products, and .Net framework.
Mike Ricciuti joined CNET in 1996. He is now CNET News' Boston-based executive editor and east coast bureau chief, serving as department editor for business technology and software covered by CNET News, Reviews, and Download.com. E-mail Mike.
1. The fine is in euro's at 899 million euro; it's the exchange rate
that makes that well over one billion USD;
2. MS is the first company in 50 years that has failed to comply
with an EU anti-trust decision;
3. MS is a multi-billion dollar company. Fining them a couple of
million would be utterly useless. I doubt even this huge fine will
hurt them even slightly.
At least the EU has shown the balls to act on MS behaviour,
unlike the US!
borrow even more money to buy Yahoo!
That said, I think it is a political issue. Of course the EU don't want an US company(msft) domination.
What option do MS have? Give up this market?
On the other hand, EU court is doing its job well. Why wouldn't an Asian or a Latin American gov. do the same? Just because MS "lobby" will "work" at those countries. If you know what I mean.
think again. Less then a year ago the European Commission fined
Heineken, which is Dutch, 220 million euro for operating a price-
fixing cartel in European markets. Bavaria and Grolsch were also
fined...
im tired of all the anti-MS antitrust whining and lawsuits, as any OSx or Linux fanboy will tell you there are better systems to be had....
my $.02
This is Microsoft's fault. They do not have a leg to stand on, just because they were able to bribe their way lout of trouble in the US doesn't mean that all governments need to cave in to the evil empire.
"Samba is an Open Source/Free Software suite that has, since 1992, provided file and print services to all manner of SMB/CIFS clients, including the numerous versions of Microsoft Windows operating systems. Samba is freely available under the GNU General Public License".
http://us1.samba.org/samba/
Therefore as the subject line states - "It Has To Be All About The Money"!
said, the sanction fits the company. Anything less would not get
their attention.
As to Samba, it is not a perfect solution and has its glitches in
working with MS technology. Ask anyone who has tried to
integrate their Mac into a Windows environment.
In light of Microsoft's history, this sanction is very fair.
Naturally Microsoft's rivals will gang up on them and tout this ruling as being fair and just, which in this case, I don't think it is. Who is having widespread interoperability problems with Microsoft products? Seems to me that it's in Microsoft's best interest to have others make products that work with Windows. Since the EU appears to be fining them left and right for this and that, it seems to me to be all about money. Think about it- They decided to fine them a couple days AFTER an announcement on an interoperability initiative? Give me a break.
This, along with many other things are what is being sought, there is not just competitive infromation that M$ is withholding, its downright scarey the security issues, and unknown risks that M$ has created.
Do you trust M$ with all of your personal information?, Access to your computer? security flaws that could allow others access? Hidden features to enable hackers? Deliberate violations and deviations of standard security protocols they claim to support? The ability to shut your system down anytime they want, when you connect to the internet?
If you think these concerns are paranoid dribble you have blinders on. It does not matter that there are alternate options, that does not equivically imply people have a choice.
I can not choose to use Mac in all of my work environment, even though the option is available, it will not do certain things I need. In other circumstances the Mac is my only choice, for certain work.
M$ being the dominant market share, to in effect a stabndardizing body, has a responsibility to adhere to those standards, and at the very least publish deviations from documented standards.
What if a different standards conforming body were to behave like this, say the power company? And they decided that they could serve more customers by changing the line voltage or frequency, thereby affecting all current users disabling many devices, and then worse by not letting anyone know what that new voltage or frequency was such that only they could develope devices for it?
Is that right in your eyes?
Just like all the other M$ apologists, you chose to ignore a crucial fact. Let me make clear for you.
WHEN YOU ARE A MONOPOLY, THE USUAL RULES DO NOT APPLY ANYMORE. YOU DIDN'T PLAY BY THE RULES, AND HENCE CANNOT EXPECT TO BE TREATED BY THE NORMAL RULES.
You say: "How come that poor guy is in a room with iron bars? Don't they have freedom of movement in this country?"
Once again: Wear your glasses: THE GUY IS A CHILD MOLESTER.
> They act as though they don't understand how open economy works.
YOU act like you don't understand how "open economy" works. Incidentally: it is called "free market", or "capitalism" not open economy.
-RFH
If you are the only person who produces and sells books in language X, then you are a monopoly. Lucky you, there is nothing wrong with this.
When someone else comes along and prints a new story in that language X, and attempts to sell it and you attempt to prevent or usurp them, mass producing a similar story in that language X and bundling it with your best seller, you are breaking the law, you are being anti-competetive.
Especially when you start to try to change the language, everytime a competitor shows up, such that competitors can no longer write in that language....
This is of course an over simplification, but you get the idea.
If you break the law, you are a criminal. You will then be penalized for your crime.
This is basic stuff, but obviously this needs to be explained to you.
Surely you have heard the saying, if you can't do the time (pay the fine) don't do the crime.
Read this article: "Software Patents for Methods of Doing Business?A Second Class Citizen No More" by "Arnold B. Silverman" which states inter alia:
"For many years, anyone seeking to patent the use of a computer for functions that were previously performed manually had double trouble if the invention related to a ?way of doing business.? First, the Patent and Trademark Office decided that mathematical algorithms were not a statutory category of subject matter that could be protected by patent. Second, ?business methods? were held to be unpatentable. These two objections have been eroded over the years.
Recently, software inventions involving algorithms have been eligible for United States patents as long as tangible results are produced. Also, in the mid-1980s, Merrill Lynch won a court ruling that it was entitled to have a patent on its Cash Management System, which involved various types of processing of financial data by computer.
In 1998, the U.S. Court of Appeals for the Federal Circuit in the State Street case destroyed the last remnant of the ?method of doing business? objection to obtaining a patent. It ruled that no legal basis exists for such an exception to patentability and that if an invention otherwise meets the standards for patentability, there is no legitimate basis for denying the issuance of a patent. This ruling was made for a software invention that used computerized processing to establish a system for pooling of assets of mutual funds.
The State Street decision, combined with the rapid growth of e-commerce, has led to a large number of patent filings on software inventions related to a method of doing business. Amazon.com, for example, patented its ?1-click? system, which enhances the speed and efficiency with which a customer can place an order..."
http://www.tms.org/pubs/journals/JOM/matters/matters-0012.html
Also, The "Fifth Amendment to the United States Constitution" states inter alia:
"No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use without just compensation..."
http://en.wikipedia.org/wiki/Fifth_Amendment_to_the_United_States_Constitution
Simply put - "You Get What You Pay For"; otherwise , it is intellectual dishonesty.
copier of tech, not an innovator.
The EU is not driving American business from its shores as your
post implies.
It is simply not allowing MS to ignore the rules in another
country nor to behave in the same predatory fashion that earned
it the distinction of 'convicted monopolist' in the US.
The EU is financially in trouble. Now they fine a large corporation that is out of their coverage area a huge fine that will to their own coffers and not to the countries they support.
I see a conflict of interest here. Granted, this is the EU and they can set whatever laws they want and nobody has any input on it unless you are a resident of the member countries.
I'm curious how they set the amount of the fine. Do they look at their ledgers and determine what they need for an operating budget and then go after others for this income? It seems awfully convenient.
As the EU sets the regulations for what they consider to be an antitrust, they are pretty much free to do what they will. Even if MS complied with every demand (and there is no doubt of what this is), somehow I feel they would have still claimed foul and charged a fine- they do need to get their money some how, right?
Webster's has a definition for this:
ex-tor-tion
noun 1. an act or instance of extorting.
2. Law. the crime of obtaining money or some other thing of value by the abuse of one's office or authority.
3. oppressive or illegal exaction, as of excessive price or interest: the extortions of usurers.
4. anything extorted.
Now while this may apply to the Unitied States, the EU is free to call it whatever they wish. There is nothing Microsoft can do about this. The EU has gone after Apple and Boeing for money as well. It's legal for the EU to do this in their member countries.
Imagine if the US Government decided to do this to non-US countries like Shell Petroleum, Arco, Toyota, etc? Hmm... now that I think of it, perhaps this is a way the US can get back some of the huge oil profits. The EU has set the way. Heh. Wishful thinking, I know.
If you know anything about football the MS defence is running the rivals out of bounds as the MS offence charges up the gut with punishing running plays. All the while running the clock down on these companies.
This is a different kind of game and apparently MS knew of the fines and went ahead with their plans regardless. I for one believe MS does the math every single time and found that they would make more going with their plan and just taking the fines if they ever came.
Everyone needs to realize that Microsoft calculated all of this long befre it happened.
This is the Microsoft MO. Just look at the history it is the same play and stunt moves over and over again. MS simply has such a strong strangle-hold in our society that this company does exactly what it wants to do.
Microsoft can not do what it wants. It is an illegal monopoly and has to follow the rules set up for it.
They had four years to come into compliance and didn't. This is the result of arrogance on the part of Microsoft.
What US laws have BMW violated? Why should they be fined? MS bribed its way out of sanctions in the US, why cry because the EU isn't as corrupt as the US government?
I am curious, how do you remember to breathe?
If we cast our minds back, not to far, we might also recall that golden period when U.S. Owned agricultural conglomerates operated in South America, also unburdened by regulation & scrutiny.
I don't understand enough of the E.U. problem to say what's right or wrong in that particular instance, however your alarmist diatribe, followed by an "economic call to arms" displays an almost atypical belligerence, compounded by a distinct unwillingness to view the situation in anyway that doesn't fit your U.S.- centric world view.
Red's under the Beds - how 1950's, it's time to move on, please.
Sure they roll a little this way or that to ajust just a wee bit but to MS this is just tiddly-winks.
Microsoft does not seem that bothered by these fines.
That would be epic...
Suppose that MS met the demands of the EU and paid the fine. That should satisfy the EU and they would have no reason at all to go after them further, right?
Somehow I suspect they would find something else to go after at that point. Why let a cash cow get away, after all?
I believe they would keep going after then with fine after fine after fine. If you can't find laws they are violating, then make some up and do it that way. As long as you can still milk that cow, it really doesn't matter.
I know this is all originally supposed to be about the actual consumers in the EU member countries, but I believe they got left out of the equatin a long time ago. I'd be impressed if the EU took the fines and paid those consumers, but I doubt that would actually happen.
What you basically said is "a bank robber did his time so he should be able to continue robbing banks without penalty".
That is a new low in logic, even for you.
When you break a big law you pay a big price.
Microsoft is the only company in 50 years to not comply. They have infringed in a pretty big way.
Do you think giving a murderer 30 days in prision will deter him from doing it again?
Likewise if the fine is not going to hurt Microsoft, then they will continue to break the law.
Simple as that.
Micrsoft had detailed satalite maps of this battle field and felt is was a wiser move to keep the MS ball in play and just take the fine if it ever came.
Don't kid yourself. The EU knew what would happen. MS knew. MS just decided to take the more lucrative path. This is a repeat of history.
Simple
- Clueless
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by mackenzie2881
February 27, 2008 8:44 AM PST
- Why do you say Europe has a socialist regime?
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- Perhaps....
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by Commander_Spock
February 27, 2008 8:48 AM PST
- ... nothing much has changed since that "dude" that lived in Europe and who was around during 1939 - 1945 that felt that the rest of the world revolved around Europe. Duh!
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