Ballmer Shrugs Off $1.4 Billion Fine from EU

Published: March 5, 2008

by Alex Woodie

The European Commission rained on Microsoft's big Windows launch parade last week when it fined the software goliath $1.4 billion for not complying with the commission's March 2004 decision regarding access to work group server protocols. At a conference this week, Microsoft chief executive Steve Ballmer shrugged off the fine, declaring the problems with the EC are in the past, and welcoming a future of "interoperability."

The EC issued a fine of €899 million, or about $1.37 billion at current exchange rates, last Wednesday due to Microsoft's failure to charge reasonable rates for access to protocols, which are necessary for other software vendors like IBM, Novell, Oracle, and Sun Microsystems to write client-server windows programs.

While Microsoft had lowered the fees it charged software vendors to utilize its patented information--from 3.87 percent of the licensees' product revenues for a patent license and 2.98 percent for an information license when it all started in March 2004, to 0.7 percent for a patent license and 0.5 percent for an information license in May 2007--the EC declared the lowered fees were also too high, which triggered the fine.

Microsoft finally lowered the fees to a rate approved by the EC last October, following the Court of First Instance September ruling rejecting Microsoft's appeal of the EC's landmark March 2004 ruling. The rate structure approved by the EC is a flat fee of €10 000 (about $15,200) and an optional worldwide patent license for 0.4 percent of the licensees' product revenues.

Neelie Kroes, commissioner of the European competition body, said she hopes last week's fine "closes a dark chapter" in the EC's relations with Microsoft. "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," she said.

Meanwhile, Ballmer sounded unconcerned about the EC's latest fine, according to his comments from the CeBIT tradeshow in Hanover, Germany, this week.

"We received a fine last week for some interoperability issues in the past," Ballmer said. "I think it is well understood that with the agreements that we reached with the European Commission last fall, those issues are behind us. Of course we hope the interoperability principles prove valuable in the future, but that we will leave up to the Commission."

Ballmer is referring to the four interoperability principles Microsoft announced two weeks ago, in which it pledged to be more open and less secretive concerning its protocols, products, and support of open standards. Microsoft released 30,000 pages of documentation for Windows client and server protocols that were previously available only under a trade secret license as part of that announcement. Documentation for Office and other products will be released in the coming months.

However, there is still unfinished Microsoft business before the EC. In January, the EC opened a fresh investigation of Microsoft regarding the way it supplies interoperability information for the Office suite, server products, the .NET Framework, and its new Open XML format.

Apparently, it's Ballmer's hope that the "four principles" will make that new EC investigation go away.

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