EC Fines Microsoft $357 Million

Published: July 11, 2006

by Alex Woodie

The European Commission today fined Microsoft $357.3 million for failing to comply with its landmark 2004 decision to share networking-related information about Windows. The figure is based on a fine of about $1.9 million per day from December 15 through June 20, and is less than the EC had threatened to impose on the software giant. Microsoft maintains it has strived to provide the required information, and says it will appeal the fine, which it says is too steep.

EU competition commissioner Neelie Kroes said she had no alternative but to levy fines against Microsoft. "I regret that, more than two years after the decision . . . Microsoft has still not put an end to its illegal conduct," Kroes reportedly said in a press conference Wednesday. "No company is above the law."

Microsoft still must comply with the landmark 2004 ruling, and is now making progress in that regard, according to comments by Kroes. However, if the company's efforts once more fall short, the EC said it will raise the daily fines to €3 million. Those fines would start July 31.

Microsoft chief counsel Brad Smith said the main issue was not about whether Microsoft complied with the EC's instructions, but about the clarity of those instructions. "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 today in a prepared statement.

In a press conference held today, Smith elaborated on Microsoft's latest efforts to step up its compliance endeavors. "Obviously we disagree about the last two years, but we're encouraged by the commission's comments that our recent work is, quote, 'extremely good,' unquote," he said according to a Microsoft transcript. "Having gotten clarity from the commission in April, we've met every deadline since then, and our top priority is to meet the final deadline two weeks from now."

Microsoft does not believe the $357 million fine is justified for three reasons, Smith said in his prepared statement. First, it doesn't take into account the "massive efforts" the company has made and, secondly, more than a dozen companies are already using "similar" documentation provided in the U.S. to ship actual products. Lastly, "The fine announced today is larger than the fines the commission has imposed for even the most severe competition law infringements, such as price-fixing cartels."

Microsoft now has 300 employees dedicated to working on the seventh and final deadline, a re-working of the technical documentation of one of the networking protocols that is at the heart of the matter. The deadline for that information to be turned over to the EC is July 24.

Kroes said Microsoft has successfully completed about half of the 70 documents it was required to submit for approval, adding that the company has made "constructive efforts" to comply since June 20. But she lamented that Microsoft hadn't made such an effort before. "Why wait that long?" she reportedly said during a press conference.

Microsoft and the EC are at odds over the steps the software giant has taken to comply with the EC's March 2004 antitrust decision, which required the world's biggest software company to make it easier for software vendors (who are also its competitors) to write applications for the Windows Server 2003 operating system, among other requirements. Microsoft came up with a 12,000-page report in response to that finding, and claims that document adequately describes the use of the "communications protocols" in the operating system.

When the EC continued to press Microsoft, the company offered hundreds of hours of technical assistance to developers. However, in December 2005, the EC said Microsoft's documentation, as well the offer of technical assistance, were insufficient in meeting the goal of increased interoperability and competitiveness. Microsoft subsequently tried to sweeten the pot by offering to give competitors access to source code, but the EC didn't like that, either.

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