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March 1, 2007

EU threatens Microsoft with further fines

Posted by David Hunter at 9:00 AM ET.

They’re baaack! What has the European Commission’s knickers in a twist this time is Microsoft charging competitors what they consider to be unreasonable prices for the interoperability information that has long been a problem. As a result, the Commission today threatened Microsoft with additional fines and administered a tongue lashing:

The European Commission warned Microsoft on Thursday it faced further fines in its long-running antitrust battle with Brussels, this time for seeking unreasonable prices from software makers for vital data.

Strongly criticizing the U.S. software giant, the European Union executive said the latest formal charges could lead to new daily penalties on top of fines already levied.

“In the 50 years of European antitrust policy, it’s the first time we’ve been confronted with a company that has failed to comply with an antitrust decision,” the Commission’s competition spokesman Jonathan Todd said.

He said the continuing dispute, almost three years after the Commission ruled that Microsoft had abused the dominant market position of its ubiquitous Windows operating system, was solely due to the company’s behavior.

“You have to look at their attitude faced with other antitrust authorities in other jurisdictions. This is a company that apparently does not like to have to conform with antitrust decisions,” Todd told a news conference.

The bone of contention:

Microsoft has said it would be charging for interoperability information because it was based on its own innovative work and protected by patents, but the Commission said the information was either not new or available elsewhere royalty-free.

“The Commission’s current view is that there is no significant innovation in these protocols,” European Competition Commissioner Neelie Kroes said in a statement.

“I am therefore again obliged to take formal measures to ensure that Microsoft complies with its obligations,” she said, rejecting as unfounded 1,500 pages of submissions by Microsoft.

Microsoft has four weeks to reply to the charges.

Todd said any additional fines could be backdated to December 16, 2005. The company could face an extra 500,000 euros in daily penalties from December 2005 until June 30, 2006 on top of a daily fine of 1.5 million euros already levied for failing to provide complete information during that period.

Thereafter, the maximum total fine for both offences rises to a potential 3 million euros a day, he said.

That explanation of the fine isn’t real clear, but evidently we aren’t talking chump change. As I’ve said before, Microsoft needs to make this problem go away and easily could because this interoperability information is nowhere near their “crown jewels.” Dragging it out just encourages the EU bureaucrats to find something else to complain about and that something might be really be a problem for Microsoft.

Update: The full European Commission statement is online as is a Q&A. Microsoft has now issued a response via Senior Vice President and General Counsel Brad Smith:

“Microsoft has spent three years and many millions of dollars to comply with the European Commission’s decision. We submitted a pricing proposal to the Commission last August and have been asking for feedback on it since that time. We’re disappointed that this feedback is coming six months later and in its present form, but we’re committed to working hard to address the Commission’s Statement of Objections as soon as we receive it.”

More by following the link.

Filed under Antitrust, General Business, Governmental Relations, Legal, Microsoft

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6 Responses to “EU threatens Microsoft with further fines”

  1. Bob Says:

    So the EUC’s position is that on the one hand, these protocols are so valuable that the entire competitive market is being hampered for lack of them, while at the same time figuring they represent no innovation? Maybe the EUC is confusing invention with innovation? It makes for lousy headlines, but at this point I think MSFT is right to stand their ground. This was always going to come down to whatever the Court of First Instance decides anyway.

  2. Microsoft finds a taker for EU protocol license -- Microsoft News Tracker Says:

    [...] The controversy surrounding Microsoft licensing fees for interoperability protocols in Europe took a new turn today when Microsoft announced that they had found the first licensee for the protocols offered as a result of the European Commission antitrust decision: Quest Software, Inc. and Microsoft Corp. today jointly announced that Quest has become the first licensee in the Microsoft Work Group Server Protocol Program (WSPP) established following the European Commission’s March 2004 decision. … Quest plans to develop innovative software solutions, incorporating Microsoft protocols, which will provide customers with expanded capability to integrate Unix, Linux and Java authentication systems with Active Directory beyond what is available from Quest today. … Microsoft developed the protocol licensing program to meet its obligations under the European Commission’s March 2004 decision, which required Microsoft to expand upon the protocol licensing it already offered under a U.S.-based licensing program. While 27 companies have licensed Microsoft protocol technology through the U.S. program, Quest is the first company to license protocols in the European program. [...]

  3. EU to tell Microsoft that $0 is nice round number -- Microsoft News Tracker Says:

    [...] Tobias Buck at the Financial Times has apparently gotten an early look at a confidential statement of objections from the European Commission in the dispute over how much Microsoft can charge for interoperability information and apparently the Eurocrats want a price next to zero: Microsoft will be forced to hand over to rivals what the group claims is sensitive and valuable technical information about its Windows operating system for next to no compensation, according to a confidential document seen by the Financial Times. … The group is required to license the technical information to competing groups under the terms of the European Commission’s antitrust ruling issued three years ago. Brussels hopes the order will allow rivals to design server software that runs more smoothly with Windows. … But the confidential statement of objections from the Commission in the long-running dispute makes clear that Microsoft will at best be allowed to levy a tiny fraction of the royalties it is demanding. … The Commission’s expert, who was suggested for the post by Microsoft, goes on to calculate that even an average royalty rate of 1 per cent would be unacceptable for licensees. Prof Barrett states that a 0 per cent royalty would be “better” and adds: “We can only conclude on this basis that the Microsoft-proposed royalties are prohibitively high […] and should be reduced in line with this analysis.” [...]

  4. Microsoft responds to EU complaint as Kroes talks Microsoft breakup -- Microsoft News Tracker Says:

    [...] Microsoft formally responded today to the European Commission charges that they are charging too much for the interoperability information they were forced to make available to competitors: Microsoft met a deadline for responding to European Union charges in its long-running antitrust dispute, the company said Monday, and called for regulators to clarify how much it can charge rivals for Windows server information. [...]

  5. Jim Says:

    “So the EUC’s position is that on the one hand, these protocols are so valuable that the entire competitive market is being hampered for lack of them, while at the same time figuring they represent no innovation?”

    Obfuscation != innovation.

    Everything Microsoft did is based on prior art, of course, “embrace and extend”.

  6. Confirmed: EU Microsoft antitrust appeal ruling due on Sept. 17 -- Microsoft News Tracker Says:

    [...] Confirming the rumor from early June, The European Court of First Instance announced today that they will rule on September 17 on Microsoft’s appeal of the European Commission’s antitrust judgement against them. There has been some speculation that if the court supports the European Commission, then they will become more aggressive in pursuing complaints about Windows Vista. As for the separate complaint that Microsoft has not been forthcoming with the documentation required by the original judgement, a spokesman for the Commission says that they are “still investigating.”   Filed under Legal, Governmental Relations, General Business, Antitrust, Microsoft   [Permalink] [TrackBack] [...]

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