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EU fines Microsoft another $1.3B

Wraps up 2004 case, but new investigations into Office and IE will continue, says antitrust chief

February 27, 2008 12:00 PM ET

Computerworld - The European Union's chief antitrust regulator fined Microsoft Corp. another $1.3 billion (899 million euros) today for what she said were business practices that "continued to stifle competition" after it was ordered to change four years ago.

"The commission's latest fine is a reasonable response to unreasonable actions by Microsoft," said Neelie Kroes, the EU's commissioner for competition.

Microsoft didn't dispute today's move by the EU, but said it was old news. "These fines are about the past issues that have been resolved," the company said in a statement. "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."

Microsoft had already been fined a total of $1.16 billion by the EU in two previous levies, including the original March 2004 ruling and a 2006 penalty for noncompliance. Including today's fine, the company will have been hit with penalties that total just under $2.5 billion.

"If you break the rules, you will be caught," Kroes said in a press conference announcing the fine.

Today's fine, she said, was applied because Microsoft continued to thumb its nose at the EU for more than a year -- 488 days, Kroes said at one point -- by charging an "unreasonable price" to rivals that licensed Windows' communication protocols to make their own software work more smoothly with the U.S. software maker's server products. Last October, after losing an appeal in Europe's second-highest court, Microsoft announced changes to its protocol licensing, and reduced fees to a flat-rate 10,000 euros.

After that move by Microsoft, Kroes said the company was in compliance with the 2004 order, but made it clear that fines for its past behavior were still on the table.

"In plain English, Microsoft continued to abuse its powerful market position after our March 2004 decision requiring it to change that practice," Kroes said. "Microsoft continued to stifle competition by charging prohibitive royalty rates ... which effectively rendered the offer of information pointless."

"There are lessons I hope Microsoft will learn," said EU chief antitrust regulator Neelie Kroes. "Talk, as you know, is cheap. But flouting the rules is expensive."
The fine, Kroes said, could have been nearly twice as large as the one applied today. Microsoft, in fact, had done the calculations earlier, and in a January filing to the U.S. Securities and Exchange Commission, had said it might be ordered to pay as much as $2.26 billion (1.5 billion euros). "We could have gone as far as 1.5 billion," Kroes said. "The maximum amount is higher than what we did at the end of the day."

Today's fine comes less than a week after Microsoft unveiled more changes to its licensing and information disclosure practices. Last Thursday, CEO Steve Ballmer and other executives rolled out what they called "interoperability



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