July 11, 2006 10:09 AM PDT

Microsoft awaits word on EU fine

The European Commission will fine Microsoft between 200 million and 300 million euros on Wednesday to punish it for failing to carry out antitrust sanctions, sources familiar with the situation said on Tuesday.

The two sources said Microsoft must be in full compliance with the European Commission's landmark antitrust decision of March 2004 by the end of the month, or face a further fine of up to 3 million euros, or $3.8 million, a day.

The penalty could be backdated to Dec. 15, when the European Commission set a deadline for the company to comply with its antitrust order to share information with rivals to allow interoperability.

"We have never, ever, had to fine a company for failure to respect an antitrust decision," said Jonathan Todd, a spokesman for the European Commission. "This is the first time since the European Union was formed" approximately 50 years ago, he said.

Microsoft has pledged to deliver documents by July 18 to be in compliance.

The Commission's Competition Bureau, headed by Neelie Kroes, outlined its proposed action against Microsoft on Monday to an antitrust advisory committee of the European Union's 25 member states. Although the advisory committee provided input, the ultimate decision to determine the size of the fine rests with the Commission, which will announce its decision on Wednesday, Todd said.

The issue of noncompliance dates back to 2004, when the Commission demanded that the software giant unbundle its media player from its operating system, as well as provide complete and accurate protocol information to workgroup server rivals to ensure full interoperability with Windows PCs and servers.

That order came with a record fine of 497 million euros ($613 million), which Microsoft has already paid and is in addition to the fines it will face Wednesday.

Microsoft has repeatedly complained that the Commission has been vague on the type of information it has been seeking and that it did not give the software giant enough time to respond to the changes sought.

The company, responding to the March 2004 order, delivered the first draft of its documentation later that year. The Commission, however, responded the following year that the information regarding the formatting and the ability for rivals to distill relevant code information were not adequate. The Commission set a deadline of Dec. 15, 2005, for the software giant to comply with the order.

"Microsoft asked for guidelines on how to get into compliance, and six days before the deadline, Microsoft received draft comments from the Commission's monitoring trustee, Neil Barrett," said Tom Brookes, a Microsoft spokesman.

In April, Barrett met with Microsoft and developed a template for the software maker to enter the batches of protocols and a schedule for when the information was due, Brookes said.

Seven milestones were established, six of which were to be delivered by June 30 and the seventh by July 18.

Microsoft received feedback from the trustee's team on each batch of protocols submitted, regarding whether the content was sufficient or needed changes. Revisions were resubmitted with the next batch of protocols or sometimes beforehand, Brookes said.

"This is where Microsoft is focused," Brookes said. "A number of documents have made it into the 1.0 state, and Microsoft's engineering team feels it's going well."

Should the European Commission find Microsoft has come into compliance over the past weeks or months, it will not be enough to stop the regulators from issuing a monetary fine, given it is retroactive to Dec. 15.

And if European antitrust regulators determine Microsoft remains out of compliance with the 2004 order, it could fine the software maker up to 5 percent of its average daily revenue based on the past year. That could translate into a daily fine of up to $5.45 million a day--more than double the potential level Microsoft currently faces.

The Commission in March expressed concerns regarding Microsoft's upcoming Vista operating system

The European litigation has been costly for Microsoft. The software giant could face as much as a $535.5 million fine for the compliance issue, in addition to the $613 million it has already paid when the order was instituted in 2004. Add to that a number of sizable lawsuits it settled with rivals that also had issued complaints to the European Commission.

Microsoft settled with Sun Microsystems for a whopping $1.95 billion, $700 million of which addressed antitrust related litigation. It also paid out $460 million to RealNetworks to resolve antitrust litigation.

One antitrust attorney in Europe said that given a choice between the fines and legal settlements against Microsoft and a change in the software giant's actions, competitors would choose the latter.

He added that the interaction between the Commission and Microsoft is likely one that will not be repeated by other players in the industry.

"This is very different than anything I've ever seen," the attorney said. "I have seen some cases where there's been noncompliance around the edges of a case, but never anything like this before or close to the ballpark. I would be surprised if we see anything like this ever happen again."

Reuters contributed to this report.

See more CNET content tagged:
antitrust, commission, compliance, European Union, euro

12 comments

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breaking the law really pays!
As long as the fines Microsoft has to pay are LESS than the MASSIVE amounts of cash they make from breaking the law..... they are guaranteed to continue to break the law! They are shrewd businessmen, they're not stupid, piddly fines and settlements in the realm of mere hundreds of millions are just part of their business model. The fines should be set based on how much money they made from breaking the law, and then double that or more... then we will see an instant change in their behavior!
Posted by dburry (37 comments )
Reply Link Flag
breaking the law really pays!
As long as the fines Microsoft has to pay are LESS than the MASSIVE amounts of cash they make from breaking the law..... they are guaranteed to continue to break the law! They are shrewd businessmen, they're not stupid, piddly fines and settlements in the realm of mere hundreds of millions are just part of their business model. The fines should be set based on how much money they made from breaking the law, and then double that or more... then we will see an instant change in their behavior!
Posted by dburry (37 comments )
Reply Link Flag
Nuke 'em
Instead of defending Europe the US should have nuked them!!!
This is the most ridiculous case I have ever seen. There is no clear cut set of guidelines, then they are given a few days before the deadline and then a company is fined for non-compliance? No justice here!!!
Posted by v_noronha (18 comments )
Reply Link Flag
Nuke 'em
Instead of defending Europe the US should have nuked them!!!
This is the most ridiculous case I have ever seen. There is no clear cut set of guidelines, then they are given a few days before the deadline and then a company is fined for non-compliance? No justice here!!!
Posted by v_noronha (18 comments )
Reply Link Flag
And yet
Thousands of companies do write software that is fully interoperable with Windows PCs and servers. Are the EU fines motivated by anything other than greed?

"The issue of noncompliance dates back to 2004, when the Commission demanded that the software giant unbundle its media player from its operating system, as well as provide complete and accurate protocol information to workgroup server rivals to ensure full interoperability with Windows PCs and servers."

Even though Media Player is still bundled with Windows, that hasn't stopped Apple from dominating the digital media market - even on Windows machines. Microsoft now sells a version of Windows without Media Player. No one wants that version, since everyone (except the EU) knows how to install iTunes and QuickTime Player.
Posted by just_some_guy (231 comments )
Reply Link Flag
Know how to install Quicktime?
Why bother, it comes preloaded by the manufacturer on most machines already and likewise RealPlayer is also preloaded on nearly every machine. I know because I often fix performance problem with people's machines by removing the abominable Quicktime and RealPlayer "preload" software from the system startup.

(If you don't know that "preload" software is supposed to save you a second or so of startup time for the player but of course by using up your memory and some processor full time you usually loose minutes of time because of that wasted memory for every second or so you save playing the occasional Quicktime or Real video).
Posted by aabcdefghij987654321 (1721 comments )
Link Flag
And yet
Thousands of companies do write software that is fully interoperable with Windows PCs and servers. Are the EU fines motivated by anything other than greed?

"The issue of noncompliance dates back to 2004, when the Commission demanded that the software giant unbundle its media player from its operating system, as well as provide complete and accurate protocol information to workgroup server rivals to ensure full interoperability with Windows PCs and servers."

Even though Media Player is still bundled with Windows, that hasn't stopped Apple from dominating the digital media market - even on Windows machines. Microsoft now sells a version of Windows without Media Player. No one wants that version, since everyone (except the EU) knows how to install iTunes and QuickTime Player.
Posted by just_some_guy (231 comments )
Reply Link Flag
Know how to install Quicktime?
Why bother, it comes preloaded by the manufacturer on most machines already and likewise RealPlayer is also preloaded on nearly every machine. I know because I often fix performance problem with people's machines by removing the abominable Quicktime and RealPlayer "preload" software from the system startup.

(If you don't know that "preload" software is supposed to save you a second or so of startup time for the player but of course by using up your memory and some processor full time you usually loose minutes of time because of that wasted memory for every second or so you save playing the occasional Quicktime or Real video).
Posted by aabcdefghij987654321 (1721 comments )
Link Flag
EU Bureaucrats Do Not Know What People Demands.
People by buying products and services in a free market are doing this very thing, voluntarily. Microsoft is a large company, just because of the fact, that people voluntarily buy their softwares. In practise, people have voted for Microsofts services and are still voting for them. If consumers thought, for instance in the past, like EU bureaucrats, that Microsoft, is getting to large, they would have had shopped elsewhere, even if it was more expensive or that alternative softwares did not entirely fulfil their needs. Why, because it would be a value, in this very example, for the consumers to do so. But the consumers did not shop elsewhere and are still not shopping elsewhere (even when it is free), which means that they were and are, happy with Microsoft and this story is only about politics. If we want to question peoples choices and votes, we should also question peoples votes when there are political elections. Why not, then, split political parties which are in power? We could then argue that people didnt really vote for them, it was brilliant advertising and so on, that made the choice for them. If Microsoft wants to have IE built into its operating system, they have a right to do so. It is their product. I, myself, like Firefox (and I think, IE 7 might be secure and good too), but I do believe that Microsoft is doing its customers a great service. This because, most customers do not download an alternative browser, which means that they are happy with IE. Even if it is true that earlier IE browsers have not been so secure and good. Naturally, Microsoft has the right, as any company, to keep its secrets. This is natural and has nothing to do with so called monopolistic behaviour. How would a market function properly if companies were complied to inform others of their top secrets? Even without copyright protection, they have the right to keep them. Or, should we force pharmaceutical companies to inform their competitors of their secrets too? This might spur competition! We must consider the fact that the more attractive operating system Microsoft delivers, the better price they get and the more of them will they sell. Microsoft, for example, does a lot of things to make its new operating system attractive (the Vista version). The market price mechanism functions in this way. Bureaucrats do not have this mechanism and can not know what people really want! Microsoft also, naturally, has the right to offer any file system they want and if we consider mentioned price mechanism and one of the very reasons of Microsofts success, which was standardization, we can get a clue that Microsoft is doing the right thing or at least is trying to do the right thing (we are all humans and can therefore make mistakes). Björn Lundahl, Göteborg, Sweden
Posted by Björn Lundahl (253 comments )
Reply Link Flag
EU Bureaucrats Do Not Know What People Demands.
People by buying products and services in a free market are doing this very thing, voluntarily. Microsoft is a large company, just because of the fact, that people voluntarily buy their softwares. In practise, people have voted for Microsofts services and are still voting for them. If consumers thought, for instance in the past, like EU bureaucrats, that Microsoft, is getting to large, they would have had shopped elsewhere, even if it was more expensive or that alternative softwares did not entirely fulfil their needs. Why, because it would be a value, in this very example, for the consumers to do so. But the consumers did not shop elsewhere and are still not shopping elsewhere (even when it is free), which means that they were and are, happy with Microsoft and this story is only about politics. If we want to question peoples choices and votes, we should also question peoples votes when there are political elections. Why not, then, split political parties which are in power? We could then argue that people didnt really vote for them, it was brilliant advertising and so on, that made the choice for them. If Microsoft wants to have IE built into its operating system, they have a right to do so. It is their product. I, myself, like Firefox (and I think, IE 7 might be secure and good too), but I do believe that Microsoft is doing its customers a great service. This because, most customers do not download an alternative browser, which means that they are happy with IE. Even if it is true that earlier IE browsers have not been so secure and good. Naturally, Microsoft has the right, as any company, to keep its secrets. This is natural and has nothing to do with so called monopolistic behaviour. How would a market function properly if companies were complied to inform others of their top secrets? Even without copyright protection, they have the right to keep them. Or, should we force pharmaceutical companies to inform their competitors of their secrets too? This might spur competition! We must consider the fact that the more attractive operating system Microsoft delivers, the better price they get and the more of them will they sell. Microsoft, for example, does a lot of things to make its new operating system attractive (the Vista version). The market price mechanism functions in this way. Bureaucrats do not have this mechanism and can not know what people really want! Microsoft also, naturally, has the right to offer any file system they want and if we consider mentioned price mechanism and one of the very reasons of Microsofts success, which was standardization, we can get a clue that Microsoft is doing the right thing or at least is trying to do the right thing (we are all humans and can therefore make mistakes). Björn Lundahl, Göteborg, Sweden
Posted by Björn Lundahl (253 comments )
Reply Link Flag
EU Bureaucrats Do Not Know What People Demands.
People by buying products and services in a free market are doing this very thing, voluntarily. Microsoft is a large company, just because of the fact, that people voluntarily buy their softwares. In practise, people have voted for Microsofts services and are still voting for them. If consumers thought, for instance in the past, like EU bureaucrats, that Microsoft, is getting to large, they would have had shopped elsewhere, even if it was more expensive or that alternative softwares did not entirely fulfil their needs. Why, because it would be a value, in this very example, for the consumers to do so. But the consumers did not shop elsewhere and are still not shopping elsewhere (even when it is free), which means that they were and are, happy with Microsoft and this story is only about politics. If we want to question peoples choices and votes, we should also question peoples votes when there are political elections. Why not, then, split political parties which are in power? We could then argue that people didnt really vote for them, it was brilliant advertising and so on, that made the choice for them. If Microsoft wants to have IE built into its operating system, they have a right to do so. It is their product. I, myself, like Firefox (and I think, IE 7 might be secure and good too), but I do believe that Microsoft is doing its customers a great service. This because, most customers do not download an alternative browser, which means that they are happy with IE. Even if it is true that earlier IE browsers have not been so secure and good. Naturally, Microsoft has the right, as any company, to keep its secrets. This is natural and has nothing to do with so called monopolistic behaviour. How would a market function properly if companies were complied to inform others of their top secrets? Even without copyright protection, they have the right to keep them. Or, should we force pharmaceutical companies to inform their competitors of their secrets too? This might spur competition! We must consider the fact that the more attractive operating system Microsoft delivers, the better price they get and the more of them will they sell. Microsoft, for example, does a lot of things to make its new operating system attractive (the Vista version). The market price mechanism functions in this way. Bureaucrats do not have this mechanism and can not know what people really want! Microsoft also, naturally, has the right to offer any file system they want and if we consider mentioned price mechanism and one of the very reasons of Microsofts success, which was standardization, we can get a clue that Microsoft is doing the right thing or at least is trying to do the right thing (we are all humans and can therefore make mistakes). Björn Lundahl, Göteborg, Sweden
Posted by Björn Lundahl (253 comments )
Reply Link Flag
EU Bureaucrats Do Not Know What People Demands.
People by buying products and services in a free market are doing this very thing, voluntarily. Microsoft is a large company, just because of the fact, that people voluntarily buy their softwares. In practise, people have voted for Microsofts services and are still voting for them. If consumers thought, for instance in the past, like EU bureaucrats, that Microsoft, is getting to large, they would have had shopped elsewhere, even if it was more expensive or that alternative softwares did not entirely fulfil their needs. Why, because it would be a value, in this very example, for the consumers to do so. But the consumers did not shop elsewhere and are still not shopping elsewhere (even when it is free), which means that they were and are, happy with Microsoft and this story is only about politics. If we want to question peoples choices and votes, we should also question peoples votes when there are political elections. Why not, then, split political parties which are in power? We could then argue that people didnt really vote for them, it was brilliant advertising and so on, that made the choice for them. If Microsoft wants to have IE built into its operating system, they have a right to do so. It is their product. I, myself, like Firefox (and I think, IE 7 might be secure and good too), but I do believe that Microsoft is doing its customers a great service. This because, most customers do not download an alternative browser, which means that they are happy with IE. Even if it is true that earlier IE browsers have not been so secure and good. Naturally, Microsoft has the right, as any company, to keep its secrets. This is natural and has nothing to do with so called monopolistic behaviour. How would a market function properly if companies were complied to inform others of their top secrets? Even without copyright protection, they have the right to keep them. Or, should we force pharmaceutical companies to inform their competitors of their secrets too? This might spur competition! We must consider the fact that the more attractive operating system Microsoft delivers, the better price they get and the more of them will they sell. Microsoft, for example, does a lot of things to make its new operating system attractive (the Vista version). The market price mechanism functions in this way. Bureaucrats do not have this mechanism and can not know what people really want! Microsoft also, naturally, has the right to offer any file system they want and if we consider mentioned price mechanism and one of the very reasons of Microsofts success, which was standardization, we can get a clue that Microsoft is doing the right thing or at least is trying to do the right thing (we are all humans and can therefore make mistakes). Björn Lundahl, Göteborg, Sweden
Posted by Björn Lundahl (253 comments )
Reply Link Flag
 

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