TELECOM Digest OnLine - Sorted: EU Threatens Microsoft with Fines

EU Threatens Microsoft with Fines

Paul Taylor (
Thu, 22 Dec 2005 13:43:25 -0600

By Paul Taylor

Europe's competition regulator threatened U.S. software giant
Microsoft with daily fines on Thursday for failing to comply with
antitrust sanctions a year after a top European Union court ruled it
must obey.

The European Commission said it may fine Microsoft up to 2 million
euros ($2.37 million) a day unless it complies with an order to
provide key information to allow rivals' group servers to work with
its ubiquitous Windows operating system.

"I have given Microsoft every opportunity to comply with its
obligations. However, I have been left with no alternative other than
to proceed via the formal route to ensure Microsoft's compliance," EU
Competition Commissioner Neelie Kroes said in a statement.

Shares in Microsoft fell 18 cents, or 0.7 percent, to $26.55 in midday
Nasdaq trading while the Nasdaq Composite index was up 0.4 percent.

The Brussels EU executive said Microsoft had five weeks, until January
25, to reply and show it was in compliance with the EU demands. Any
fines would be retroactive to December 15, it said.

Microsoft called the move unjustified and said it was doing its best
to obey the European antitrust watchdog's landmark March 2004 ruling,
but that Brussels kept piling on new demands.

The company vowed to contest the latest decision to the full extent
allowed by EU law including by demanding an oral hearing, which can
take months to organize, stringing out the procedure.

Alan Davis, a technology analyst with brokers McAdams Wright Ragen in
New York, said the threatened fine could come to about $600 million a
year after taxes and would cut his full-year earnings forecast of
$1.33 by 5.5 cents a share or 4 percent.

"It would be significant, but not devastating," Davis told
Reuters. But he added that he expected Microsoft to act at the last
minute to avoid having to pay the fine.

"They've tended to do things at the 11th hour," he said. "It's a cat
and mouse game with Microsoft. I doubt that it will happen."

Oracle Corp. a business software maker and one of Microsoft's most
vocal critics, applauded the EU decision.

"We are very pleased with the Commission's decision," Oracle spokesman
Bob Wynne said in a statement.

The Commission ruled in 2004 Microsoft had abused its global dominance
by leveraging its near monopoly in the market for PC operating systems
and for media players to squelch rivals.

It imposed a record 497 million euro fine and forced Microsoft to sell
a version of Windows without the Windows Media Player software used to
watch films and listen to music, giving rivals a fairer chance to

At stake now is a part of that decision requiring Microsoft "to
disclose complete and accurate interface documentation which would
allow non-Microsoft work group servers to achieve full
interoperability with Windows PCs and servers."


Microsoft said in a statement the Commission's latest demand "can open
the door to the production of clones of parts of the Windows operating
system" and went beyond the scope of the original EU decision.

"We have now responded to more than 100 requests from the
Commission. We continue working quickly to meet the Commission's new
and changing demands. Yet every time we make a change, we find that
the Commission moves the goal post and demands another change," said
Microsoft General Counsel Brad Smith.

The Commission said that in its view, supported by two reports from a
Monitoring Trustee appointed by mutual agreement, Microsoft had not
yet provided full specifications.

The Court of First Instance, the EU's second-highest court, rejected
Microsoft's appeal to suspend the measures last December and warned it
would face a daily fine if it did not comply with its obligation by
December 15, 2005.

The software giant's appeal against the substance of the EU antitrust
case is still pending and the Court of First Instance hopes to hold a
hearing by early spring.

EU Competition spokesman Jonathan Todd said Microsoft would also have
a right to appeal any fines to the EU courts.

It was the first time the EU executive had made use of new powers
enacted last year to impose daily penalties for noncompliance in
antitrust cases, he told a news conference.


The Commission said that Microsoft had indeed revised the interopera-
bility information it was obliged to disclose, but the data was
incomplete and inaccurate.

The Monitoring Trustee had found that "any programmer or programming
team seeking to use the Technical Documentation for a real development
exercise would be wholly and completely unable to proceed on the basis
of the documentation."

"Overall, the process of using the documentation is an absolutely
frustrating, time-consuming and ultimately fruitless task," the
Commission quoted the trustee, British Professor Neil Barrett, as

Todd said the company could ask for an extension of the deadline as
well as an oral hearing, which would be open to member states and all
interested parties.

Asked whether an oral hearing would delay the imposition of fines,
Todd told reporters: "The deadline is five weeks. ... If they don't
comply, they'll have to pay the fine every day."

He said other issues remained open in its appraisal of the Microsoft
case, including the royalties charged by Microsoft for
interoperability information.

(Additional reporting by Marie-Louise Moller and Marcin Grajewski in
Brussels and Jim Finkle in New York)

Copyright 2005 Reuters Limited.

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