Microsoft Faces Record Fine, New Windows Version in EU Case

European antitrust regulators will fine Microsoft a record $613 million, require the company to offer a separate version of Windows that doesn't include Windows Media Player (WMP), and compel the software giant to share more Windows Server code with competitors, according to various reports. Microsoft representatives in Europe have already described the fine as "too big," and the company has vowed to fight the ruling with an appeal.
Before any of that can happen, however, the European Union (EU) will take a few steps to finalize its ruling against Microsoft. Yesterday, its European Commission arm took the first of those steps by finalizing the wording of the ruling, which labels Microsoft a monopoly that abused its market power to crush rivals in the emerging markets of media players and server software.
Today, Commission representatives will discuss the $613 million fine with senior aides to all 20 commissioners and fine-tune the presentation of its case. Tomorrow morning, the Commission will hold its final meeting about the Microsoft ruling and officially inform the company. After that EU Competition Commissioner Mario Monti will hold a press conference about the decision.
A $613 million fine isn't going to create many problems for a company with more than $50 billion in cash assets, although Microsoft representatives in Brussels, Belgium, have already denounced the amount. "In view of the absence of a clear legal standard under EU law, a fine of this size isn't warranted," a Microsoft spokesperson said. "We believe it's unprecedented and inappropriate for the Commission to impose a fine on a company's US operations when those operations are already regulated by the US government." An EU representative responded, "We have already told Microsoft many times that a negative ruling will incur a fine. A small company could claim it didn't know the rules but not one the size of Microsoft." The company does about 30 percent of its business in countries covered by EU law.
Regardless of the fine amount, the biggest problem from Microsoft's perspective is the requirement that it ship alternative Windows versions that don't include WMP in Europe. These WMP-less Windows versions would presumably cost less than the typical Windows versions and would let PC makers more easily pursue deals with third-party media-player makers such as RealNetworks and Apple Computer.
For European trustbusters, the WMP bundling question mirrors the problem with Microsoft Internet Explorer (IE), which destroyed the market for third-party Web browsers and was at least partially responsible for sinking Netscape, which started as a high-flying Internet startup but ended as a lame-duck acquisition of AOL. The Commission is concerned that Microsoft will later duplicate this bundling strategy in Longhorn, its next major Windows release, by bundling features, such as an Internet search engine, that will have similar anticompetitive effects on other emerging markets. Microsoft has already stated its intention to add Internet search features to Longhorn and has rejected a settlement with the Commission that would have required the company to stop adding new features to Windows.
Microsoft is expected to appeal the ruling as soon as possible. Company representatives say it will appeal to the European Court of First Instance in Luxembourg.

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