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EU: Microsoft To Appeal Huge Fine

  • Breffni O'Rourke

Microsoft, the world's biggest computer software maker, says it will appeal against a fine of over $600 million imposed on it by the European Union for breaking competition rules. Microsoft has spent years battling market regulators in the United States and Europe concerned about its business methods. Reacting to the latest judgment, the company says it could even negatively affect trans-Atlantic relations.

Prague, 25 March 2004 (RFE/RL) -- The U.S.-based computer software maker Microsoft says it will lodge a legal appeal against the European Union's imposition of a $606 million fine for infringing competition rules.

The chief legal counsel for Microsoft, Brad Smith, says the ruling issued yesterday by the European Commission violates Microsoft's intellectual property and breaks World Trade Organization rules.

"We respect the commission's authority, but we believe their proposed action would actually reduce consumer choice and hurt European software developers."
Smith even suggested the ruling -- which involves the largest fine ever imposed by the EU in a competition case -- could worsen relations between the United States and the European Union. Trans-Atlantic trade tensions have already been running high in recent years over numerous disagreements.

Microsoft's chief executive officer, Steve Ballmer, says he thinks the ruling will lead to restrictions on software development, which will in the long run be bad for consumers.

Speaking in a video posted on the company's website, he said, "There's an important principle at stake in this case. We believe that every company should have the ability to improve its products to meet the needs of consumers. The commission's actions would essentially freeze our technology where it is today and that's not good for consumers or for software developers. We will continue to work in good faith to try and address the commission's concerns while protecting the principle of innovation."

In their ruling, EU officials found that the company broke competition laws by failing to provide information to competing companies that would allow them to develop products for Microsoft's "Windows"-based computers.

The company's Windows operating system is used by more than 90 percent of all computers around the world. The commission ruling ordered Microsoft to allow other companies to view its software code so that they could make products compatible with those running on Microsoft software.

The EU also found that Microsoft hindered open competition by "bundling" the Windows operating system with a program called Windows "Media Player," which allows for playing music and videos obtained over the Internet. The bundling was seen as preventing the use with Windows of similar products made by other software makers.

EU Competition Commissioner Mario Monti said the European Commission ruling is aimed only at ensuring a level playing field in the market for software makers.

"The result is a decision which is proportional to the market abuses we identified and balanced in what it requires the company to do to restore competition in the marketplace," Monti said.

Monti says the fine was calculated based on the size of Microsoft's European sales. The ruling from Brussels gives Microsoft 120 days to reveal its software code and 90 days to offer a version of Windows not bundled with Media Player.

"We are asking Microsoft to disclose the information necessary to make sure that competitors' products can fully and properly talk to Microsoft's dominant operating systems,” Monti said. “We are also asking Microsoft to offer a version of its ubiquitous Windows operating system without Windows Media Player."

Until a week ago, Microsoft and the EU were hoping to reach a compromise under which the software company pledged to address the code-sharing issues.

Ballmer expressed regret the EU had not taken up the compromise.

"We respect the commission's authority, but we believe their proposed action would actually reduce consumer choice and hurt European software developers. If you compare the commission's action with the settlement we proposed, it's clear that our settlement would have offered far more choices and benefits to consumers," Ballmer said.

Monti reportedly rejected the settlement because it would have allowed Microsoft to continue using similar anti-competitive methods in other segments of its business. The ruling issued yesterday forbids Microsoft from engaging in any activities that could have an impact "equivalent" to the banned infringements.

Microsoft was founded by American Bill Gates -- now frequently cited as the world's richest person. Microsoft has soared to its dominant position based on the widespread use of its operating system and its tough marketing methods.

But its pre-eminence and business practices have led it into trouble. Some six years ago, the U.S. Justice Department and legal officials from 20 U.S. states filed an antitrust lawsuit against Microsoft, seeking its dismemberment. The case eventually led to a compromise settlement. But nine of the states held out for more severe action against Microsoft, and brought fresh proceedings, which were eventually rejected by a federal court judge.