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EU Fines Microsoft $1.35 Billion

The European Commission has levied a fine of €899 billion—some $1.35 billion U.S.—against software giant Microsoft for failing to comply with terms of March 2004 antitrust decision that mandated Microsoft disclose interface and protocol information of its work group systems so third parties could create products that interoperate successfully with Windows. The Commission has found that, through October 22, 2007, Microsoft abused its dominant market position and charged unreasonable prices for access to that documentation…which independent reviewers had previously found to be incomplete and inaccurate.

The penalty is the largest ever levied against a company in 50 years of EU antitrust regulation. The new fine raises the total penalties assessed against Microsoft by the EU to €1.68 billion.

“Microsoft was the first company in fifty years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision”, said European Competition Commissioner Neelie Kroes, in a statement. “I hope that today’s decision closes a dark chapter in Microsoft’s record of non-compliance.”

In October, 2007, Microsoft agreed to comply with the EU’s mandate for access to interoperability information and reduced royalty rates on documentation. Initially, Microsoft had charged a 3.87 percent on licensees’ products to cover patents, and another 2.98 percent for the “trade secret” information license. In May, 2007, Microsoft reduced those rates to 0.7 percent for a patent license and 0.5 percent for the information license within the European Economic Area, then in October it shifted to a flat €10,000 fee for the information license and an optional 0.4 percent royalty for the patent license.

The European Commission found that the rates Microsoft was charging prior to October 22, 2007, were unreasonable based on the lack of innovation found in the “very large proportion” of the unpatented interoperability information, along with price comparisons to similar technologies.

In a statement, Microsoft said the EU’s decision and penalty addresses “past issues” and the company is looking towards the future. The company last week announced a new interoperability policy that provides free access to much of the “trade secret” information for which it was previously charging royalties; it has also promised it won’t sue open source developers who implement key Microsoft protocols. However, the European Union and Microsoft rivals are waiting to see how Microsoft delivers on its interoperability promises.

Microsoft still faces two formal EC investigations, dealing with how the company tied Windows Media Player and Internet Explorer into Windows.

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