EU fines Microsoft $1.36 billion

The Baltimore Sun

WASHINGTON -- The record $1.36 billion fine Microsoft Corp. must pay the European Union will not buy the software company much peace.

Yesterday's penalty, which amounts to almost one-third of Microsoft's last quarterly profit, officially closes a nine-year antitrust battle with European regulators that has cost the company $2.5 billion in fines.

But those regulators are still pursuing two new investigations into the software giant's business practices. They also loom as an obstacle to Microsoft's proposed takeover of Yahoo Inc., which would need approval in Brussels, Belgium, and Washington.

"Antitrust is a chronic condition of doing business for Microsoft," said Matt Rosoff, an analyst at research company Directions on Microsoft. "I don't think that's going away."

In 2004, the European Union found that Microsoft had abused its dominance in desktop operating systems to limit competition. It ordered the company to make technical information available to companies so their software would work with Windows and other Microsoft products.

European regulators levied yesterday's fine after determining that, for three years after the ruling, Microsoft had charged "unreasonable prices" for that information.

Neelie Kroes, European Commissioner for Competition Policy, sharply criticized Microsoft for not living up to its promises to regulators.

"Talk is cheap. Flouting the rules is expensive," she said at a Brussels news conference. "We don't want talk and promises. We want compliance."

Kroes' tough stance shows that the European Commission, the EU's antitrust regulator, remains unhappy with Microsoft and will aggressively pursue the two new investigations it launched in January, said Harry First, a New York University law professor who is writing a book about the company's antitrust litigation.

"It's a lot of zeros on that fine," he said.

Microsoft said it was reviewing the commission's action.

"The commission announced in October 2007 that Microsoft was in full compliance with the 2004 decision, so these fines are about past issues that have been resolved," the Redmond, Wash.-based company said in a statement.

Microsoft has spent about $10 billion in fines and settlements with competitors over antitrust issues in Europe and the United States, Rosoff said. It's the world's largest software maker, generating $51.1 billion in revenue and $14.1 billion in net income during its fiscal year that ended June 30.

The fine tops the commission's previous record of $605 million, also against Microsoft, for the original 2004 antitrust abuses. The commission also fined Microsoft $351 million for failure to comply with other aspects of the decision.

Microsoft chief executive Steven A. Ballmer and Kroes met last fall at a restaurant near her Dutch hometown of Rotterdam and began the process of settling the 2004 antitrust case. Ballmer agreed to drop Microsoft's appeal and lower prices for access to the technical data needed to make products work with Windows.

Kroes said that until that decision, Microsoft had overcharged for the information.

"Microsoft's behavior did not just harm a few individuals or a handful of big companies," she said. "Directly and indirectly this had negative effects on millions of offices in companies and governments around the world."

In January, European regulators started two new antitrust investigations to determine whether Microsoft had used its dominance in word processing and spreadsheet programs to stifle competition. Last week, Microsoft announced it would make tens of thousands of pages of technical documentation available for free in hopes of heading off new antitrust lawsuits.

Kroes said the investigations launched in January were not completed. "As always, we will take into account any changes that Microsoft makes to its business practices that are relevant to those investigations," she said.

Jim Puzzanghera writes for the Los Angeles Times.

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