updated 08:50 am EST, Wed February 27, 2008
EC Fines MS 1.4B
Microsoft will have to pay a fine equal to $1.35 billion for allegedly violating already existing antitrust sanctions, the European Commission said today. The demand comes after a follow-up investigation by the regulatory body which reported that Microsoft had held back on code necessary to let rival firms develop more explicitly compatible software, particularly for workgroup server programs. The amount far exceeds the original $330 million fine imposed in 2004 for the original violation and is characterized as punishment for Microsoft's reluctance to obey the ruling -- a resistance which is unprecedented for the EC, according to Competition Commissioner Neelie Kroes.
"Microsoft was the first company in 50 years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision," Kroes added.
The Windows developer is particularly charged with deliberately obstructing ease of access by providing information only to companies willing to pay steep royalty rates; companies seeking interoperability code needed to pay out almost 3 percent of their sales revenues to Microsoft for the privilege, while patent licenses cost almost 4 percent. This negated most of the benefit of implementing Microsoft's technology and saw the company agree to lower its rates only after sustained pressure from European officials in 2007, which at first dropped the rates only for Europe but extended to other regions in October. The new fine is based on Microsoft's practices until that last date, the EC said, with the original penalty having cost Microsoft $795 million in 2004 and non-compliance between 2006 and 2007 costing an extra $442 million in today's dollars.
Microsoft is believed to have announced its decision to publish free Office and Windows code documentation to avoid further European litigation and earn favor from the Commission. While unsuccessful in softening the results, the act leaves the new fine as a penalty for "past issues" rather than a reflection of current behavior, according to an official Microsoft response.
The company may face additional fines based on additional investigations launched at the same time as the EC's latest efforts, which suggest Microsoft has used similar stalling tactics for its Excel and Word software and that the firm may have developed its Office Open XML format in bad faith, hoping to quash the opposing Open Document Format championed by Sun and other direct challengers.