The European Union (EU) announced today that Microsoft is guilty of abusing its "near monopoly" in desktop and server OSs and fined the company a record $613 million. Additionally, the EU gave Microsoft 90 days to offer European computer makers a new Windows version that doesn't include Windows Media Player (WMP) and 120 days to give competitors the vital information they require to write software applications that work more closely with Windows Server products. The EU's restrictions and requirements are limited to the European market only "in deference to the competition authorities of the United States and other countries," according to EU Competition Commissioner Mario Monti. Microsoft says its proposed settlement, which the EU shot down last week, would have been better for consumers. The company vows to appeal this decision to an EU court in Luxembourg.
"Today's decision restores the conditions for fair competition in the markets concerned and establishes clear principles for the future conduct of a company with such a strong dominant position," Monti said. "We are not expropriating Microsoft's intellectual property. We are also not breaking new legal ground either in Europe nor in the US. I am confident that we have produced here a decision that will stand before any appeal. I do not believe that Microsoft, with its resources and knowing of the allegations outlined during the course of the investigation over the past 5 years, was not aware that it could be breaking EU competition law."
The EU decision includes the following ramifications for Microsoft:
- The $613 million fine might be the largest in EU history, but it's unlikely to cause much hardship for a company that has more than $50 billion in cash and liquid assets. To put the fine in perspective, it's technically smaller than the company's outlay in its settlement with the state of California, although most of that $1.1 billion deal involved computer and hardware vouchers, most of which will never be redeemed.
- The requirement to ship a Windows version without WMP hits Microsoft square in its corporate jaw, given the company's decade-long approach to bundling technologies into Windows. Microsoft has made and destroyed markets based on which technologies it includes in Windows. And for every example of a positive move (e.g., the integrated TCP/IP stack in Windows 95), there are dozens of disruptive moves (e.g., Microsoft Internet Explorer's--IE's--effect on Netscape and dozens of other now-forgotten but innovative browser companies). How PC makers will react to this choice is currently unclear, but the requirement could save money for PC makers with third-party media player deals--think HP and its iTunes deal with Apple Computer--because Microsoft is expected to offer this "Windows Lite" version at a discount.
- The requirement to supply third parties with technical information about Windows Server products is a toss up. Although such companies could use the information to create products that might ultimately defeat Microsoft products in a free market, those third-party products would also strengthen Microsoft's position in the server market by making the company's server products more valuable. Basically, this requirement is a wash: Microsoft would have been wise to have simply agreed to provide this information a long time ago.