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Wednesday, February 27, 2008
 EU Fines Microsoft $1.35 Billion
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Message Text: The European Commission fined Microsoft a record €899 million ($1.35 billion) on Wednesday for defying sanctions imposed on the software giant for antitrust violations, far exceeding the original penalty.

The EC's decision finds that, prior to 22 October 2007, Microsoft had charged unreasonable prices for access to interface documentation for work group servers. The 2004 Decision, which was upheld by the Court of First Instance in September 2007 , found that Microsoft had abused its dominant position under Article 82 of the EC Treaty, and required Microsoft to disclose interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers at a reasonable price.

"Microsoft was the first company in fifty years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision", said European Competition Commissioner Neelie Kroes. "I hope that today's Decision closes a dark chapter in Microsoft's record of non-compliance with the Commission?s March 2004 Decision and that the principles confirmed by the Court of First Instance ruling of September 2007 will govern Microsoft's future conduct".

The Commission?s Decision of March 2004 requires Microsoft to disclose complete and accurate interoperability information to developers of work group server operating systems on reasonable terms.

Initially, Microsoft had demanded a royalty rate of 3.87% of a licensee's product revenues for a patent licence (the "patent licence") and of 2.98% for a licence giving access to the secret interoperability information. In a statement of objections of 1 March 2007, the Commission set out its concerns regarding Microsoft's unreasonable pricing. On 21 May 2007, Microsoft reduced its royalty rates to 0.7% for a patent licence and 0.5% for an information licence, as regards sales within the EEA, while leaving the worldwide rates unchanged.

Only as from 22 October 2007 did Microsoft provide a licence giving access to the interoperability information for a flat fee of €10 000 and an optional worldwide patent licence for a reduced royalty of 0.4 % of licensees? product revenues.

Today?s Decision concludes that the royalties that Microsoft charged for the information licence ? i.e. access to the interoperability information - prior to 22 October 2007 were unreasonable. Microsoft therefore failed to comply with the March 2004 Decision for three years, thereby continuing the behaviour confirmed as illegal by the Court of First Instance. Today's Decision concerns a period of non-compliance not covered by the penalty payment decision of 12 July 2006 starting on 21 June 2006 and ending on 21 October 2007. The Decision does not cover the royalties for a distinct patent licence.

After fining Microsoft 497 million euros in 2004, the Commission fined the company another 280.5 million euros in July 2006 for failing to comply with the sanctions.

The latest decision picks up from where that fine left off, for the period from June 21, 2006 until October 21, 2007. After that, Microsoft agreed to reduced royalties and to provide needed information.

Last week, knowing a large fine was imminent for its failure to provide interoperability information, the company publicly promised to publish critical information so rival programs worked better with Windows.

The Commission took a wait-and-see attitude. It said Microsoft had several times made similar promises, only to have no real effect.
 
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