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EU slaps Microsoft with fine

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EU slaps Microsoft with big fine

By David Lawsky and Sabina Zawadzki Wed Jul 12, 3:46 PM ET

BRUSSELS (Reuters) -
European Union regulators fined Microsoft an extra 280.5 million euros ($357.3 million) on Wednesday for defying a 2004 antitrust ruling, and warned the company to comply or face bigger fines in future.

The tough new penalty is the first of its kind and comes on top of a record 497 million euro fine the Commission imposed in its landmark antitrust decision against the U.S. software giant in March 2004.

"The EU Commission cannot allow such illegal conduct to continue indefinitely. No company is above the law," Competition Commissioner Neelie Kroes told reporters.

The Commission required Microsoft to provide technical information to rival server software makers after it found the company abused the dominance of its Windows operating system, used worldwide on 95 percent of personal computers, to squeeze out competitors.

"Microsoft did not even come close to providing adequate information," Kroes said.

The fine covers the period from December 16 to June 20 at 1.5 million euros daily. It fell short of a possible daily maximum of 2 million euros. Microsoft faces a further fine of up to 3 million euros a day if it still does not comply by July 31.

Shares in Microsoft were 1.22 percent down at $22.82 by 1614 GMT, leading a broader fall in U.S. stocks.

The move signals the Commission's determination to force the company to obey its order and a loss of patience after Microsoft had two years to comply and used virtually every available legal and court procedure to spin out the process.

"It puts (Kroes) in a position of authority generally, which will make business across the board much more inclined to comply," said Chris Bright, a London competition lawyer, adding that energy companies could be the next focus.

The Commission's hardline approach contrasts with that of the United States, which in 2000 had similar findings against Microsoft but ended up reaching a settlement on sanctions. Last month, the U.S. judge supervising the case called the implementation of the settlement "disappointing."

The American process was so troubled that Microsoft and the court started over again in May this year, taking a cue from what the U.S. judge called "the
European Commission's direction." Kroes noted this new U.S. approach on Wednesday.


Microsoft said it has made massive efforts to comply with the Commission's 2004 ruling and now has 300 people working to complete its package by an agreed deadline of July 18.

It called the fine unjustified, but said that will not slow its effort to comply. Microsoft, which has appealed against every ruling against it so far by the Commission, said on Wednesday it will appeal against this decision too.

"We do not believe that any fine, let alone a fine of this magnitude, is appropriate given the lack of clarity in the Commission's original decision," said Brad Smith, the company's top lawyer, in a conference call.

But he said that Microsoft remains totally committed to full compliance with the Commission's 2004 decision.

Kroes called the original order "crystal clear." It required interoperability information on reasonable and non-discriminatory terms.

The EU's second highest court is already reviewing an underlying challenge by Microsoft to the original Commission decision, and conducted a hearing in April.

After years of investigation, the Commission found in 2004 that Microsoft used the near-monopoly power of its Windows operating system to harm competitors making workgroup servers, which run printing and sign-on services in offices.

It ordered Microsoft to give rivals the information needed so their servers could compete on a level playing field with Microsoft's own by interconnecting smoothly with Windows.

It also found that Microsoft harmed competitors by illegally bundling its Windows Media Player with the operating system, leaving consumers little incentive to buy rival software to watch films or listen to music.

The bundling issue poses concerns already voiced by Kroes about Microsoft's next operating system, Vista, which could package Internet search functions or software that creates fixed documents and thus threaten Google and Adobe.

"The launch next year (of Vista) will hopefully be in a shape in which all those 2004 decision items are taken into account," Kroes said.

Microsoft's Smith said the company had made "design changes" to Vista after Kroes wrote to the company in late March and that he expected feedback from the Commission soon.

For a factbox of the key issues in the Commission's Microsoft case, click on

For a factbox on Microsoft's antitrust challenges worldwide, click on

For a chronology of Microsoft's battles with U.S. and EU regulators, click on