February 28, 2008 in Business

EU fines Microsoft

Aoife White Associated Press
 
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The European Union is fining Microsoft Corp. $1.3 billion for charging rivals too much for software information. The fine is the largest ever for a single company and the first time the EU has penalized a business for failing to fully comply with an antitrust order. Microsoft has been fined nearly $2.4 billion by European antitrust regulators over the years.Associated Press
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BRUSSELS, Belgium – The European Union’s longest-running fight with Microsoft Corp. neared an end Wednesday as regulators imposed a record $1.3 billion fine on the world’s largest software company for failing to fully comply with a 2004 antitrust order.

Microsoft has not decided whether to appeal the penalty, which amounts to a fraction of the $14.07 billion it earned in fiscal 2007. In all, the company has been fined just under $2.4 billion by European antitrust regulators over the years.

Barring an appeal, the fine shuts the door on an investigation into Microsoft’s behavior that was triggered by a 1998 complaint by Sun Microsystems Inc. It alleged Microsoft was refusing to supply information that servers need to work with its market-dominating Windows operating system.

Microsoft eventually made the information available to rivals, but the EU said it charged “unreasonable prices” until last October.

EU Competition Commissioner Neelie Kroes said Microsoft now appears to have finally complied with the 2004 EU antitrust order. But she warned that the company was not yet in the clear because the EU last month launched new probes into its Office software and Internet Explorer browser.

The fine was handed down as Microsoft pursues its biggest acquisition to date, but Matt Rosoff, an analyst at the research group Directions on Microsoft, said it would have no effect on the software maker’s bid for Web portal operator Yahoo Inc.

“This is a fine for past behavior,” said Rosoff, unrelated to Microsoft’s offer for Yahoo, which was valued at $44.6 billion in early February.

Kroes also was skeptical over Microsoft’s announcement last week that it was further expanding its efforts to make its software work better with rival technologies. A news release, she said, “does not necessarily equal a change in business practice.”

“Talk is cheap. Flouting the rules is expensive,” she said.

Wednesday’s penalty far outweighs the next biggest fine – $613 million imposed on Microsoft for using its role as the world’s leading supplier of desktop software to elbow into new markets for workgroup servers and media players.

Fines – which can hit as much as 10 percent of company’s global yearly revenue – are paid into the EU budget which pays out farm subsidies and research grants. The European Commission claims antitrust fines ultimately help reduce the financial burden on European taxpayers.

Microsoft earned $14.07 billion on $51.12 billion in worldwide sales during its last fiscal year that ended June 30.

“We could have gone as high as 1.5 billion euros,” Kroes said, referring to an amount equal to about $2.2 billion. “The maximum amount is higher than what we did at the end of the day.”

Microsoft’s actions stifled innovation, hurting millions of people who use computers in offices around the world, she said, calling the fine “a reasonable response to a series of quite unreasonable actions.”

The software titan fought hard against the EU’s 2004 decision that ordered it to share interoperability information with rivals and sell a version of Windows without media software, taking an appeal to an EU court that it lost last September.

It was fined again in July 2006 – $357 million – for failing to obey that order.

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