European Commission Slaps Microsoft with $1.3 Billion Fine

• By Jeffrey Schwartz
• 02/27/08

The European Union's antitrust commission today fined Microsoft 899 million Euros or $1.3 billion today for its failure to comply with the EU's 2004 finding that Redmond was engaged in monopolistic practices.

The company had warned investors Jan. 14 in its quarterly 10-Q filing that it could be fined as much as $2.2 billion and last week took what are its greatest steps yet to publish its APIs and communications interfaces.

The ruling comes on another big day for Microsoft, which is scheduled to officially launch) its suite of enterprise server products: the 2008 versions of Windows Server, Visual Studio and SQL Server.

Today's penalty brings the total fines levied by the EU up to a record $2.5 billion and comes on the heels of Microsoft's decision last week to publish the APIs and communications interfaces and a commitment to work on a level playing field with the open source community.

A Microsoft spokesman said in an email that it is reviewing the Commission's action, but "these fines are about past issues that have been resolved." Based on last week's announcement, "we are trying to focus on steps that will improve things for the future," the spokesman added.

"We'll make licenses available at low royalty rates and under reasonable and nondiscriminatory terms," Ray Ozzie, Microsoft's chief software architect, said when announcing the changes.

The EU's European Commission quickly lambasted Microsoft saying it had made such promises in the past. "The Commission notes that [Microsoft's] announcement follows at least four similar statements by Microsoft in the past on the importance of interoperability," the European Commission said in a statement last week.

In regard to today's fine, the EC said it charged Microsoft for "unreasonable prices for access to interface documentation for work group servers," and also because "Microsoft had abused its dominant position under Article 82 of the EC Treaty, and required Microsoft to disclose interface documentation which would allow non-Microsoft work group servers to achieve full interoperability."

In last week's call, Microsoft's general council and senior VP Brad Smith said the company intends to comply with European laws. "Microsoft is committed to taking all necessary steps to ensure that we're in full compliance with European law," Smith said.

The four principals Microsoft promised last week apply to its high-volume products, as well as to the patent framework developed in October covered by the CFI decisions, Smith noted. That framework, he said, has two components: first is to make all patent licenses for the protocols on "reasonable and nondiscriminatory terms, and at very low royalty rates."

The second was the promise not to sue open source developers for noncommercial implementations.