Microsoft fined record €899m by EU over market abuse

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The European Commission yesterday fined Microsoft a record €899m (£681m) in the latest stage of a bitter battle with the US software giant. Microsoft was ordered to pay the penalty after the commission declared it had failed to comply with a ruling in 2004 that it had abused its dominant market position.

Neelie Kroes, the EU's Competition Commissioner, said the size of the fine reflected the commission's fury over Microsoft's behaviour during the three years since that ruling. "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 anti-trust decision," Ms Kroes said.

Yesterday's fine follows two other hefty penalties imposed on Microsoft by the commission – a €280m fine levied in 2006 for anti-competitive behaviour and a €497m sanction following the initial 2004 ruling.

The latest penalty was a punishment for the way Microsoft reacted to the commission's ruling in 2004 that the inclusion of its own media player software in its Windows operating systems prevented other providers from selling competing media players.

The commission therefore ordered Microsoft to offer versions of Windows products without the media player. It also told the company to make much more information available about how its software worked, so that rival companies could design products that would operate alongside Windows, which has an almost complete monopoly in the computing market.

Microsoft subsequently offered this information to rivals, but insisted on charging a royalty of almost 4 per cent of product revenues to companies that wanted to use it. The commission said yesterday these fees were unreasonable and prohibitive, and fined Microsoft for its behaviour until October last year, when, having lost an appeal against the original decision, the company reduced the royalty charges to levels deemed more acceptable.

Adam Collinson, a partner at the international law firm Eversheds, said there would be a degree of sympathy for Microsoft, because the commission had taken some time to decide that its royalty charges were too high.

"Microsoft had to make a judgement as to what levels of royalty would be regarded as reasonable for supply of the interoperability information," he said. "It seems it got this judgement wrong, but it was not until 1 March 2007 that the commission raised formal concerns as to the actual levels of royalty being demanded."

Microsoft said yesterday it now regarded the case as closed. "The commission announced in 2007 that Microsoft was in full compliance with the 2004 decision, so these fines are about the past issues that have been resolved," a spokesman said.

The software giant also pointed out that it had last week announced additional plans to enable rivals to design competing products, promising to share the computing code for its leading products, including the Windows operating system.

However, Microsoft may still face further penalties. While the software giant believes it has now complied with the terms of the 2004 ruling against it, the commission is investigating two other complaints about allegedly anti-competitive practices.

One inquiry follows complaints from a group of European software producers that Microsoft still isn't sharing enough information about the way its products work. The other focuses on whether the extent to which its Explorer internet browser is tied in to Windows is unfair.