EU Hits Microsoft With Record Fine

Byline: John Burgess

BERLIN, March 23 -- Microsoft Corp. has abused a "near monopoly" to squeeze competitors out of the market, the European Union ruled Wednesday, ordering the software company to pay fines equivalent to $613 million and to offer two versions of its Windows operating system in Europe.

The ruling, the culmination of a contentious six-year investigation, imposes penalties more severe than those the software company agreed to when settling similar U.S. antitrust charges in 2001. Microsoft, based in Redmond, Wa., has said it will appeal the ruling.

The fines are the largest ever imposed by the European Commission, which handles economic and other policy matters for the union's 15 member states. With $10.15 billion in revenues in the quarter that ended Dec. 31 and $6.1 billion in cash and equivalents on hand, Microsoft would not be financially pressed to pay the fines. Many antitrust analysts saw the main impact as symbolic.

The European case is narrow, focusing on Microsoft's inclusion of a media player software in its Windows operating system, used on more than 90 percent of the world's computers, and its withholding of technical data concerning its software for big server computers.

But EU officials hope that it will provide a precedent for curtailing a practice at the core of anti-trust complaints against Microsoft for more than a decade, that by including more and more features in Windows, it is illegally using dominance in one field to dominate another.

With the decision, "we simply ensure that anyone who develops new software has a fair opportunity to compete in the marketplace," EU competition commissioner Mario Monti told reporters in Brussels Wednesday, following a vote by the 20-member European Commission, the EU's executive arm. "Our decision is about protecting consumer choice and stimulating innovation."

Microsoft argues that adding features to Windows benefits consumers by giving them greater functionality and establishing technical standards.

Imposition of the penalties, which also include a requirement to share technical data that would help competitors make compatible server software, will be put off at least for 60 days while Microsoft prepares its appeal.

Efforts by the company and commission to settle the case collapsed last week because the commission insisted that Microsoft agree not only to address the media player and data disclosure issues, but to agree to limitations on features it could incorporate into future versions of Windows.

Litigation in the United States in the 1990s focused on Microsoft's inclusion of the Internet Explorer in Windows. A judge initially ordered the break up of the company. That was overturned on appeal, and the company settled with the federal government in a deal that established no principle of limits to what Windows can contain in the future.

The European case began with a 1998 complaint by Sun Microsystems Inc. that Microsoft did not disclose sufficient technical data on the software that runs on big server computers, making it hard for competitors to create compatible programs.

During investigation, the case expanded to include Microsoft's practice of including a media player -- a subprogram that plays video and sound -- in Windows.

The EU determined that this was an illegal use of dominance in the field of operating systems to create dominance in another. Consumers, it determined, were unlikely to obtain a competing media player if there was already one included in Windows.

Under the penalties announced by the commission, Microsoft would have 120 days to disclose technical data about its server software, and 90 days to offer two versions of Windows, one with a media player and one without.

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