EU Fines Microsoft $357 Million

In an unprecedented move, the European Union (EU) on Wednesday fined Microsoft $357 million and threatened to assess additional fines of $3.82 million per day beginning July 31. Microsoft, the EU says, has failed to comply with the EU's 2004 antitrust ruling and has continued its noncompliance since a December 2005 warning.

"I regret that, more than two years after the decision, Microsoft has still not put an end to its illegal conduct," EU Competition Commissioner Neelie Kroes said. "I have no alternative but to levy penalty payments for this continued noncompliance. No company is above the law." The fine was based on a daily fee of $1.91 million for each day of noncompliance from December 15, 2005 to June 20, 2006. But Kroes said the fine was lenient, because the company could have been fined as much as $5.47 million per day.

If Microsoft doesn't fully comply with the antitrust ruling by July 13--which it could do by providing the EU with "complete and accurate" technical information that would allow Microsoft's competitors to better interoperate with its server products--the new fines will kick in.

Kroes also took this opportunity to publicly warn Microsoft about Windows Vista, its upcoming successor to Windows XP. Vista includes potential anticompetitive technologies, such as integrated Internet search and document imaging, and Kroes says that Microsoft is aware of the EU's concerns there.

Microsoft immediately announced that it would appeal the fine. "We do not believe this fine is justified," Microsoft General Counsel Brad Smith said. "We have great respect for the Commission and this process, but we do not believe any fine, let alone a fine of this magnitude, is appropriate given the lack of clarity in the Commission's original decision and our good-faith efforts over the past two years."

Kroes was quick to denounce the "lack of clarity" sound bite and noted that Microsoft has been making this bogus complaint since late 2005. "I don't buy that line," Kroes said, adding that the EU's requirements have always been "crystal clear." She said that part of the reason to assess the fines now was that Microsoft was still not making much progress on the technical documentation. On June 20, an independent monitor appointed to supervise Microsoft's work reported that only one of the 70 documents that Microsoft was preparing was complete. As of today, only half of the documentation is complete, according to the monitor.

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