EC Slaps $357M Fine on Microsoft

The European Commission today fined Microsoft  280.5 million euro ($357 million), saying it failed to comply with the commission’s demands that the software giant unbundle its media player from Windows and disclose information that would allow rivals to interoperate with Windows.

The move, widely expected after the EC said Microsoft has repeatedly failed in meeting its terms, is the first time in the 49 year history of the European Union that the commission has had to fine a company for failure to comply with an antitrust decision.

The EC commenced fining Microsoft US $1.9 million a day retroactive to December 16, 2005, through June 20, 2006.

Microsoft said it would appeal the fine.

The EC also said in a statement that should Microsoft not be in compliance with its obligations by July 31, it will be subject to a fine of US $3.8 million per day.

In a strongly worded statement, EC Commissioner Neelie Kroes took Microsoft to task.

“The European Commission cannot allow such illegal conduct to continue indefinitely,” Kroes said, noting that it has been more than two years since the commission found Microsoft to be in violation of the EC’s antitrust rules.

“No company is above the law. Each and every company, large or small, operating in the European Union must obey EU law, including competition law, to the benefit of all companies and European consumers.”

Microsoft General Counsel Brad Smith expressed disappointment in the commission’s action, but said Microsoft will ask the European courts to determine whether the company’s compliance efforts have been sufficient and whether the commission’s fine is justified.

“We have great respect for the commission and this process, but we do not believe any fine, let alone a fine of this magnitude, is appropriate given the lack of clarity in the commission’s original decision and our good-faith efforts over the past two years,” Smith said in a statement.

Smith said until this past April, Microsoft was not provided a clear definition of the documentation requirements.

Despite the lack of clarity, Smith said “we already have met nearly all those requirements in just three months” and plans a final delivery date for this project on July 24.

But Kroes said the commission has looked carefully at reports by monitoring trustee Neil Barrett and Microsoft’s documentation and said the software vendor “did not even come close to providing complete and accurate specifications.”

Kroes also noted that though the fine is a substantial amount of money, the commission has shown restraint in setting the level of the fine.

The EC initiated these proceedings against Microsoft in March 2004, alleging that abused its “virtual monopoly” with its Windows operating system and broke European antitrust law governing competition.

The commission asked Microsoft to create a version of Windows without its media player to give companies like RealNetworks a chance to put their media software on PCs. The EC also asked Microsoft to provide interfaces so that rivals can make their software work with Microsoft’s products.

The latest fine is a symbol of the widening gulf between the EC and Microsoft over the ruling, as well as compliance with it.

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