RealTime IT News

Microsoft to Appeal EC's Latest Fines

Microsoft said it would appeal the European Commission's $357M fine, arguing regulators jumped the gun over demands for technical documentation.

Laying groundwork for an appeal expected within two months of today's EC decision, Brad Smith, lead counsel for the software giant, said the commission was acting hastily.

"It's hard to understand why the Commission is rushing to grade our homework before the due date we've all agreed upon," Smith told reporters in a conference call following today's announcement.

The EC fined the company $1.9 million a day retroactive to Dec. 16, 2005 through June 20, 2006.

Saying Microsoft had dragged its feet for over two years, EC Commissioner Neelie Kroes called the software maker's actions illegal and that it was not above the law.

Regulators also held out the possibility of fining Microsoft $3.9 million each day if the Redmond-based company does not comply by July 31.

Smith said grounds for the appeal include three points, chief being lack of clarity.

"This decision did not have the kind of clarity that would justify this type of fine," according to Smith.

To date, Microsoft has been given a five-word guideline for what they EC expects from the company: "complete and accurate technical specifications," said the company lawyer.

Microsoft may also argue its technical documentation is already used by U.S. licensees, six of which testified in a March hearing.

The software company is also challenging the EC on a third point: that this isn't an issue of noncompliance. Every time the EC has asked for Microsoft to do something, it's been done, Smith argued.

"We didn't need a fine in order to get us to agree to do things," according to Smith.

Microsoft is still weighing the EC's decision, according to a spokesperson.

However, the company is concerned regulators acted before Microsoft could submit the final batch of technical documents, expected July 18, according to spokesperson Jack Evans.

That is earlier than the July 24 deadline the EC had set for the last installment of documentation.

As expected, industry groups on both sides of the issue had plenty to say about the EC's decision.

Microsoft supporter CompTIA denounced the fines as part of an "arbitrary and capricious competition policy" difficult to discern. The group said only those with "regulatory clairvoyance" can understand the rules, according to a statement.

The European Committee for Interoperable Systems, a nonprofit group with members including Adobe, Sun and RealNetworks, in a statement applauded the EC's action and denounced Microsoft's decision to appeal as impeding EU antitrust enforcement.

The Software and Information Industry Association (SIIA) hailed the new round of fines, saying in a statement, Microsoft's delays were "unjustified and inexcusable."

But are the hand-wringing and fiery words having an effect on competition? Not likely, say analysts.

David Smith of Gartner downplayed the importance of the Europe versus Microsoft epic. The market, not the EC, is having more effect on Microsoft, according to Smith.

Microsoft spends more time worrying about Google than the EU, Smith said. Microsoft's power is diminishing, providing more opportunity for competition, believes the analyst.

Like Smith, Matt Rosoff of Directions on Microsoft sees the company moved by market forces rather than regulatory rulings.

"I can't imagine Microsoft wants these fines dragging down earnings, especially given its financial performance last quarter," Rosoff said.

Rosoff believes the EC and Microsoft are at an impasse.

With Microsoft claiming the EC refuses to issue clear guidelines and the EC charging the software company won't follow instructions, both analysts agree we are far from reading the final chapter of the Microsoft versus EU book.