RealTime IT News

Microsoft Faces Stiff Fines From EU

The European Commission's decision on Microsoft's business practices this week may prove very costly for the world's largest software vendor.

Mario Monti, the European commissioner in charge of competition, has gotten agreement from the rest of the commission on the ruling including a preliminary figure associated with the penalties, according to published reports. The Commission, the EU body charged with monitoring community issues including fair trade and competition, has accused Microsoft of antitrust practices. The full decision by the EU could come as early as Wednesday.

On Monday, the Commission met briefly and agreed to Monti's draft ruling and proposed penalties, a Reuters report said. The EC is now expected to hit Microsoft with a fine of more than $600 million (497 million euros) and tell the Redmond, Wash.-based firm to provide a version of the Windows operating system without an integral media player. The decision would also require Microsoft to open its server APIs, so that rival server software vendors will have a better idea of how Windows interacts with the Windows Server product line. EU spokespersons were not available for comment. Officials with Microsoft did not return repeated requests for an interview.

Negotiations between Microsoft and the EC officially ended Friday on a very positive note. Microsoft president Steve Ballmer said that his company had reached agreement on the case, but had gotten stuck on letting the Commission have a say on what Microsoft does in the future.

"I believe negotiations between Microsoft and the European Commission broke down because we were unable to agree on a set of consumer driven principles on issues that might arise in the future," Ballmer said in a statement.

"It's likely things broke down at the core issue in all of this," said Mark Ostrau, co-chair of the antitrust group of the technology law firm Fenwick & West. "Microsoft feels it needs unfettered freedom to add functions to the operating system, and the Commission is saying there needs to be lines drawn."

Ballmer reinforced the approach, supposedly boasting that his company should be free to "bundle Windows with a ham sandwich" if it wants to.

How high are the stakes for Microsoft? The EU's fine on Microsoft's 2003 revenues of $3.2 billion would pack a wallop, especially on top of the multi-million dollar judgments the company has been hit with in a series of patent infringement suits.

A ruling that Microsoft must produce a version of player-free version of Windows would make it a lot easier for other media player providers to get their software on the desktop. But requiring an EU-specific version of Windows could hurt not only Microsoft but also computer makers, according to Herbert Hovenkamp, a professor of law at the University of Iowa and the author of numerous books on antitrust law.

"Traditionally, OEMs have been reluctant to support two or more competing versions of the same software," Hovenkamp told internetnews.com. "They have the expense and headache of supporting two applications instead of one."

The EU's antitrust investigation of Microsoft officially began in 2000, after a complaint from Sun Microsystems pushed the European Commission to survey a wide variety of businesses. The overwhelming majority complained that Microsoft would not disclose interface information that was necessary for competing servers to communicate with Windows PCs and servers.

The same industry survey led the Commission to conclude that the inclusion of Media Player with the Windows OS stifled competition and product innovation. In February 2000, the Competition Directorate General of the European Commission asked Microsoft to provide technical information that would allow it to determine the truth of allegations that Microsoft bundled its PC operating system, server software and middleware so that, "in order to ensure full exploitation of functionalities embedded in Windows 2000 for PCs, customers would de facto be obliged to purchase Windows 2000 for servers."