Record Fine
February 27, 2008
Microsoft was hit Wednesday, Feb. 27, by an 899-million euro ($1.34 billion) fine from the European Commission for refusing to comply with a long-standing request to provide competitors with key software data at a fair price.
The fine is the largest ever levied against a single company in European Union history and the third of its kind to target the American software giant, raising the total to 1.68 billion euros.
"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", said European Competition Commissioner Neelie Kroes. "I hope that today's decision closes a dark chapter in Microsoft's record of non-compliance with the commission's March 2004 decision."
Microsoft looking ahead
The company said in a statement that the fines concerned "past issues," and it was now looking to the future.
"We are reviewing the commission's action," Microsoft said in a statement. "The commission announced in October 2007 that Microsoft was in full compliance with the 2004 decision, so these fines are about the past issues that have been resolved."
In September, the EU's Court of First Instance rejected a Microsoft appeal against a 2004 ruling with which the bloc's executive imposed a 497-million-euro fine -- and an additional 280.5 million-euro penalty in December 2005 -- on the company for abusing its dominant position.
The EU argues that Microsoft has been able to reap unfair benefits and damage consumers by refusing to give "interoperability" protocols -- instructions needed by group servers to work effectively with Windows -- to its rivals.
Fee schedule changed
Without access to the protocols, Microsoft's competitors were largely unable to create programs that work smoothly with the Windows operating system, which is run on 95 percent of the world's computers and 80 percent of the global group server market, and Microsoft came to dominate the market.
Microsoft had initially demanded a royalty rate of 3.87 percent of a licensee's product revenues for a patent license and 2.98 percent for a license giving access to the secret interoperability information.
The company later reduced its royalty rates for European Economic Area customers to 0.7 percent and 0.5 percent respectively, but only started charging what the EU considers a reasonable flat fee of 10,000 euros on Oct. 22, 2007.
According to Brussels, Microsoft had therefore failed to comply with its demands for three years.
New standards, looming investigations
Last week Microsoft said it was making "broad-reaching changes" to its technology and business practices to enhance the ease with which its software interacts with partners, customers, and competitors.
"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," the Microsoft statement said.
The EU has in the past also objected to Microsoft's decision to bundle its own media player with the operating system. In January it launched two new probes into complaints that Microsoft was using its dominant position to block rival Web browsers and office software developers.
The money raised by EU fines is paid into its budget.