Is Microsoft getting reamed by the EU?

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EU Orders Microsoft to End Monopoly Abuse


Mar 24, 8:50 AM (ET)

By David Lawsky

BRUSSELS (Reuters) - European Union regulators ordered U.S. software giant Microsoft Corp on Wednesday to pay a record fine for violating EU antitrust law and change its business model fundamentally to stop crushing rivals.

The European Commission said Microsoft must act within four months to give competitors in audio-visual software and servers used in millions of offices in Europe a fairer chance to compete "because the illegal behavior is still going on."

The Commission -- enforcer of EU competition law -- levied a record 497.2 million euros ($611.8 million) fine, ordered the unbundling of Windows Media Player within 90 days and required that "complete and accurate" information be given to rival makers of computer servers within 120 days.

"Today's decision restores the conditions for fair competition in the market concerned and establishes clear principles for the future conduct of a company with such a strong dominant position," Competition Commissioner Mario Monti said.

In a historic decision mirroring a U.S. appeals court finding, the Commission described Windows, which runs on more than 95 percent of all personal computers, as a "near monopoly."

Microsoft General Counsel Brad Smith called the decision "unfortunate," vowed to challenge it in the EU courts and said he would seek the suspension of the key sanction that it must sell an alternative version of Windows stripped of Media Player.

He forecast four or five years of litigation but said he still hoped to reach a mutual settlement with Brussels.

Settlement talks collapsed last week because the two sides were unable to agree on commitments about Microsoft's future business practices.

"We believe the proposed settlement would have been better for European consumers," the company said.

Stock markets had little reaction to the decision with Microsoft shares broadly steady in Frankfurt and on Instinet from their Tuesday close.

DECISION WATERTIGHT

Rebutting Microsoft's key objections, Monti declared: "We are not expropriating Microsoft's intellectual property. We are also not breaking new legal ground, neither in Europe nor for the United States."

After an exhaustive five-year probe, in which the EU executive sent Microsoft three statements of objections to its practices, the company could not credibly argue it was not aware it could be violating EU law, he said.

The grey-haired Italian former economics professor expressed confidence that the decision would withstand any appeal by Microsoft to the Luxembourg-based European Court of Justice.

Rejecting criticism that the fine was peanuts for a company with a $53 billion cash pile, he said the ruling would act as a deterrent and set a precedent that could be used in private lawsuits against the company.

The Commission will appoint a special monitoring trustee to ensure that Microsoft's disclosures to rivals are "complete and accurate and that the two versions of Windows are equivalent in terms of performance."

Monti said the decision gave manufacturers freedom to choose which software they installed in personal computers to play films and music, and did not mean consumers would get PCs and operating systems without a media player.

It contained provisions barring Microsoft from circumventing the ruling, for example by offering discounts to computer makers which installed the version of Windows with Media Player.

The Commission ruled that Microsoft bundled its own audiovisual player to damage such rivals as RealNetworks RealPlayer and Apple Computer Quicktime.

DEFINING MOMENT

Monti said the landmark decision, the defining moment in his five-year term which ends in October, would also set a framework for quicker decisions in pending investigations into Microsoft's Windows XP operating system, and all future probes, even if each would be handled on its merits.

The decision to go for a broad remedy follows a decade of investigations and settlements on narrow issues without any formal findings against the software firm.

A U.S. appeals court ruled unanimously in a final 2001 decision that Microsoft broke antitrust rule, but critics say the remedies there failed to encourage vigorous competition.

The Commission fine exceeds the record 462 million euro penalty imposed on Switzerland's Hoffman-La Roche AG in 2001 for leading a vitamin cartel.

Nonetheless, it amounts to slightly more than one percent of Microsoft's roughly $53 billion cash on hand. On January 22 it projected expected revenues of $8.6 billion and operating income of $3.1 billion for the current

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[Mavdog]

Albuquerque, the birthplace of the PC.

One has to admit that Micrsoft's GPM borders on the obscene, yet they have provided a product that is affordable. Would we be online w/o MS? wasn't there once a pr saying "Windows makes it all possible"?

Id presume that the battle isn't over the $ fine, but what MS must open up to others. $600M isn't the issue.

They shouldn't be forced to give a proprietary product away. There are alternatives out there, right?

[Chiwas]

MS software wasn't the only option, nor the best, but they bargained better. I'm refering back to the 1978-1982 period.

Microsoft has always been in the edge of the anti-monopoly laws and taking great advantages of obsolete legislation in the part corresponding to software, and also of subtle virtual products.

[dude1394]

I believe that microsoft should quit selling their software to europe.

[mavsman]

I believe that microsoft should quit selling their software.