EU fines Microsoft £331m for breaching competition rules

Microsoft was today fined a record £331 million by the European Commission, which made orders designed to tackle the company's sales monopoly.

Microsoft was today fined a record £331 million by the European Commission, which made orders designed to tackle the company's sales monopoly.

The decision may be a financial flea bite for the computer giant but it is a big political and legal headache for the chairman Bill Gates. Microsoft was told it must no longer making purchase of its Windows operating system conditional on buying the firm's Media Player program.

Microsoft had been accused of breaching EU competition rules by "bundling" its own software and other services with its Windows system.

That made it difficult for other software makers to compete - particularly as Microsoft withheld the technical codes which allowed Windows-based personal computers to work better with servers.

Microsoft said the information was its own intellectual property and that offering a complete package was part of its commercial strategy.

The strategy worked well - more than 90% of personal computers worldwide run on Microsoft software.

Today's ruling in Brussels followed a four-year investigation led by Competition Commissioner Mario Monti, who said: "It is essential to have a precedent which will establish clear principles for the future conduct of a company with such a strong, dominant position."

But the real battle has only just begun: Microsoft is appealing against the fine to the European Court of Justice and a final verdict could take five years.

Meanwhile, Microsoft will be seeking suspension of the Commission's order to start selling within 90 days a version of Windows without Media Player and to make available within 120 days the information other companies need to produce compatible rival server products.

Mr Gates is furious that the EU is interfering at all when Microsoft is already subject to anti-trust laws in America.

But Mr Monti said the company's commercial methods affect millions of European customers and must comply with European Union laws.

The Commission, he argued, has a duty to offer monopoly protection to Microsoft's commercial rivals - and its retail customers - in Europe.

With a healthy bank balance estimated at nearly £40 billion, Microsoft will not be troubled by the size of the fine, even if it is the biggest ever sought by the Commission against any company.

But the knock-on effect of changing the way Microsoft markets its products in Europe could be huge.

Mr Gates is now determined to challenge the Commission's contention that the company which made him the world's richest man is an "abusive monopolist" which has manipulated the market at the expense of others.