Q&A: Why the European Commission took action against Microsoft

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What has Microsoft done now?

The European Commission ruled on Wednesday that Microsoft failed to comply with an earlier antitrust ruling by the Brussels regulator from March 2004.

The US software group was at the time found guilty of abusing its dominant market position and told to change its business practices.

Among other things, Microsoft was ordered to disclose technical information about its flagship product, the Windows operating system, to rival companies.

More than two years after that ruling, the Commission believes that Microsoft has still not drawn up “complete and accurate” information as demanded by the ruling.

Why the fine?

Under European Union competition rules, companies that fail to implement an antitrust ruling can be fined up to 5 per cent of their daily worldwide turnover for every day they are in non-compliance. In Microsoft’s case, that would be about $5.5m.

However, the Commission said last year that it would fine Microsoft no more than €2m ($2.54m) a day, and that the period would only start on December 15 2005 – the final compliance deadline set by the regulator. In the end, the Commission settled on a daily rate of €1.5m, to run until June 20. Hence, the €280.5m total.

And things could get even more expensive?

That’s right. The Commission on Wednesday lifted the ceiling for future daily penalties to €3m, indicating that it believes Microsoft is still not in compliance and will be fined for a longer period.

Moreover, the Commission believes that Microsoft has also failed to comply with the ruling in another respect, namely by demanding excessive licensing fees from companies that may want to use the technical information in the years ahead.

So what is the final bill for Microsoft going to be?

The group was made to pay a record fine back in March 2004 – €497m. Wednesday’s ruling added a further €280.5m to the bill. There are likely to be further daily fines until the Commission is convinced that the technical documentation is up to scratch.

After that, the regulator may impose further penalties for alleged excessive licensing fees and there could even be further fines should the Commission pursue a fresh case against Microsoft, for example, over its new Vista operating system.

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