EU Fines Microsoft $358 Million

The European Commission fined Microsoft Corp. 280.5 million euros ($357 million) Wednesday for not complying with a 2004 antitrust ruling.

Microsoft, which was ordered in March 2004 to provide technical documentation on communication protocols so that competitors could create software that would work with Windows servers and PCs, had been threatened with fines since December of last year.

"I regret that, more than two years after the decision, Microsoft has still not put an end to its illegal conduct," said Commissioner Neelie Kroes, the head of the European Union's antitrust agency, in a Brussels press conference. "We cannot allow such illegal conduct to continue indefinitely. No company is above the law."

The fine, which Kroes said was calculated at a rate of 1.5 million euros ($1.9 million) per day from December 16, 2005 to June 20, 2006, was less than the threatened 2 million euros per day penalty first discussed last year.

"The Commission has shown restraint in setting" the fine, Kroes said, but with Microsoft "not even coming close to providing documentation, we had no option but to impose a penalty payment."

Microsoft, however, blasted the size of the fine and said it would appeal the Commission's decision in court.

"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," said Brad Smith, Microsoft's general counsel, in a statement.In December, the Commission declared Microsoft in violation of the 2004 antitrust ruling that found the company used its near-monopoly position as the creator of Windows to drive rivals out of the server software market.

Since then, Microsoft has claimed that the Commission's demands were unclear and constantly shifting. In December, Smith said that "Every time we make a change, we find that the Commission moves the goal post and demands another change." He repeated the contention Wednesday, saying that the company only got a clear definition of the documentation requirements from the Commission in April.

Kroes rejected the argument. "I don't buy Microsoft's line that they didn't know what they must provide. The [2004] decision was crystal clear."

The Commission also set a new maximum fine that it will apply in the future if Microsoft continues to balk, said Kroes.

"If [this] is not sufficient, the Commission will again be forced to consider the imposition of fines. Should it not comply from the 31st of July, the Commission will raise the fines to 3 million euros ($3.8 million) per day."

But since June 20, Microsoft has been doing "an extremely good job" of delivering the necessary technical documentation, Kroes acknowledged. A decision on whether Microsoft has met its obligation, and whether to slap the company with the larger fine, will be made "in a couple of months," she said.Microsoft is to deliver the remainder of the documentation to the Commission and its technical advisor, Neil Barrett, by July 24. That, and Kroes' comments about Microsoft's recent progress, led to another blast from Smith.

"It is hard to understand why the Commission is imposing this enormous fine when the process is finally working well and the agreed-upon finish line is just days away," he said.

In a question-and-answer, Kroes said she has not made a decision on a second complaint filed with the Commission, this one about Microsoft Office filed by the European Committee for Interoperable Systems (ECIS), a group that counts Microsoft rivals IBM, Sun Microsystems, and Oracle as members.

She also reminded Microsoft that it was the Commission's position that the 2004 decision pertains to future operating systems, particularly Windows Vista.

"I have informed Microsoft that it should take the [2004] Decision into account when designing Vista," said Kroes.See a timeline of milestones in the Microsoft / EU legal saga.