Microsoft Fined Record EU899 Million by EU Regulator

European Union regulators fined Microsoft Corp. a record 899 million euros ($1.35 billion) for failing to comply with a 2004 antitrust order to stop overcharging for using its patents to connect to Windows.

``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,'' European Competition Commissioner Neelie Kroes said in a statement today in Brussels. ``I hope that today's decision closes a dark chapter in Microsoft's record of non-compliance.''

Microsoft, the world's largest software maker, announced last week that it will help competitors' software work better with some products, such as Office, in an effort to allay EU regulators' concerns over its dominance. While today's ruling ends the 2004 antitrust case, for which the company was fined the previous record 497 million euros, the EU has two new investigations under way over Microsoft's business practices.

The fine brings the total penalty to 1.68 billion euros in the case. Microsoft shares fell 7 cents to $28.31 at 10:38 a.m. in Nasdaq Stock Market trading. In a statement, the Redmond, Washington-based software maker said it would review the decision, which found Microsoft overcharged for patent licenses that rivals needed to connect products to the Windows platform.

``These fines are about the past issues that have been resolved,'' the company said. ``As we demonstrated last week with our new interoperability principles and specific actions to increase the openness of our products, we are focusing on steps that will improve things for the future.''

Increased Oversight

The commission, known for vetoing General Electric Co.'s proposed $47 billion merger with Honeywell International Inc. in 2001, has ramped up its oversight of U.S. technology companies such as Intel Corp., Rambus Inc. and Qualcomm Inc. in recent years. Last July the regulator charged Intel with abusing its dominance in the computer-chip market. It's also probing potential antitrust abuses by Rambus and Qualcomm over royalty rates on chip-technology licenses.

Microsoft sought to limit potential EU fines by agreeing in October to make network data available to open-source software developers so server programs can connect to the Windows operating system, which runs 95 percent of the world's personal computers.

Brent Williams, a New York-based analyst with Benchmark Co. who recommends investors buy Microsoft shares and doesn't own any himself, said the fine isn't large enough to hurt Microsoft.

``It's not about the financial impact,'' he said. ``If Microsoft has $1.3 billion of cash disappearing suddenly off the balance sheet, it doesn't affect their ability to invest in growth at all.''

Appeal Possible

Microsoft can appeal the penalty at the European courts in Luxembourg. A European court upheld the commission's ruling against Microsoft in September, meaning the company wasn't in compliance for three years.

On March 1, 2007, the EU threatened Microsoft with millions of euros in daily fines backdated to December 2005 for failing to fully comply with the 2004 antitrust order.

Under that decision, Microsoft had to provide data to rivals to allow servers to connect to the Windows platform. When patent licenses were necessary for that network data, Microsoft was required to charge ``reasonable'' royalties.

Last month, EU regulators opened investigations into whether Microsoft is using its dominance in word processing and spreadsheets to thwart rivals and whether the company illegally tied an Internet browser to Windows. Today's fine isn't related to the new probes.

`Talk is Cheap'

Benchmark's Williams said the EU will continue its ``aggressive'' stance toward Microsoft, ultimately helping its rivals.

``Over time, every competitor is going to look at that and say `is there an opportunity for me to take advantage of the fact that Microsoft can't do X without further legal problems, and can I exploit that?'''

Kroes said at a press conference that the commission would take into consideration ``any changes'' Microsoft makes to its business practices that are relevant to the two new cases. She said that it's the fifth time that Microsoft has made an announcement about improving interoperability.

``Talk is cheap,'' Kroes said. ``Let's wait and let's find the reality in this case. They have to deliver and implement.''

In July 2006, the EU also imposed a 280.5 million-euro penalty on the software maker for failing to license information to rivals on how Windows communicates over a network. It was the first time that the EU had fined a company for failing to comply with an antitrust order.

Thanks to: Bloomberg.

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