EC hits Microsoft with record US$1.35B fine

The European Commission has imposed a further penalty on Microsoft for failure to comply with sanctions.

The European Commission has fined Microsoft 899 million euros (US$1.35 billion) for failing to comply with a ruling imposed for antitrust violations.

The new fine, announced on Wednesday, far exceeds the original penalty imposed in 2004, and leaves other EU actions open.

The total fine imposed on Microsoft by the Commission, the executive arm of the European Union, is now 1.68 billion euros (US$2.5 billion). This is more than the Commission has fined any other company, and Microsoft is the only company ever to ignore Commission sanctions.

"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," competition commissioner Neelie Kroes said in a statement. "I hope that today's decision closes a dark chapter in Microsoft's record of non-compliance with the Commission's March 2004 decision."

In a statement, Microsoft said the fines concerned "past issues" and it was now looking to the future, claiming that its promise to publish interface information showed a willingness to improve.

In 2004 the EU ruled that Microsoft had withheld information from rivals on how to interoperate with its software, fined it 497 million euros (US$747 million), and ordered it to make the information available to its rivals.

The information consists of interfaces that would allow rival companies to make competing work group servers. By keeping the information to itself, Microsoft damaged the market share of these products and kept a dominant position in the market.

After the EU ruling, Microsoft made the information available but charged royalties, which the EU has argued are excessive. According to EU rulings, Microsoft has been charging "unreasonable prices for access to interface documentation for work group servers".

Microsoft claimed these interfaces involved significant innovation, and initially asked companies to pay a royalty on all products using them, set at rates of 3.87 percent for a patent license, and 2.98 percent for a license giving access to the secret information.

The EU said these rates were unreasonable, because the technology was not innovative, but resembled a secret combination for a lock Microsoft had placed on its own products. The Commission therefore fined the company another 280.5 million euros (US$422 million) in July 2006 for failing to comply with demands.

In May 2007, Microsoft reduced these rates to 0.7 percent for a patent license and 0.5 percent for an information license within the EU, but left worldwide rates unchanged. It reduced rates further in October 2007, with a license that gives access to the interoperability information for a flat fee of 10,000 euros (US$15,000) and an optional worldwide patent license for a reduced royalty of 0.4 percent of licensees' product revenues.

The latest decision covers the period from 21 June, 2006 until 21 October, 2007--after which, Microsoft's reduced royalties satisfied the EU.

Knowing this fine was imminent, Microsoft announced it would publish critical information to let other products work with Windows. The Commission noted that Microsoft has made similar promises several times, without any real effect.

The Commission still has two outstanding antitrust investigations against Microsoft, both started in January. One relates to interoperability, and the other concerns the tying of separate software products.