EU tough stance, fine prompt movement by Microsoft

The European Commission is due to fine Microsoft on Wednesday as part of a hard-line approach towards getting the software giant to comply with antitrust sanctions that appears to be bearing fruit.

The extent of Microsoft's new-found cooperation in the face of a penalty that is likely to reach hundreds of millions of euros is impressing even the Americans, until now highly critical of Brussels' approach.

U.S. Justice Department lawyer Renata Hesse conceded in May that the American approach -- which has not relied on coercion -- had failed to accomplish as much in five years, more than twice the time since Europe in 2004 ruled the firm was exploiting a near-monopoly.

"They're obviously further along at this point than we are," Hesse told a U.S court in reference to the European method.

For the European Union executive, the policy is quite clear.

"If people are not ... conforming (with) our regulations, our rules, then it needs to be corrected," EU Competition Commissioner Neelie Kroes said late last week. She said she could not imagine that Microsoft would avoid a fine when the Commission met this week.

The European Commission will reveal on Wednesday the size of its fine. It will be set at up to 2 million euros ($2.6 million) a day, backdated to December 15, 2005 and extending to some time before Wednesday. The fine's dimensions will be endorsed in a closed meeting of the 25 EU countries on Monday.

Brussels' tough new penalty is on top of 497 million euros in fines the Commission already imposed in its landmark antitrust decision against Microsoft in March 2004.

After years of investigation, the Commission found that Microsoft used near-monopoly power from its Windows operating system to harm competitors making "work group servers", which run printing and sign-on services in offices.

The Commission ordered Microsoft to give rivals the information needed so their work group servers could compete on a level playing field with Microsoft's own. Microsoft must help its rivals interconnect smoothly with Windows.

Microsoft was supposed to ready the information for competitors by June 2004. The company tried to have the sanctions suspended until it could complete a court challenge to the 2004 decision, but late that year a judge said no.

In the Commission's view, Microsoft moved too slowly. Finally it threatened the software giant with daily fines in December 2005, and within months Microsoft agreed on a plan.

A Microsoft spokesman rejected the idea that the company had dragged its feet.

"Microsoft has done everything that the Commission has ever asked of it," he said.


With the Brussels fine hanging over its head, Microsoft and the Commission's "monitoring trustee" agreed in April on a schedule for the documentation needed for work group servers. Microsoft said it had not understood until then what the Commission wanted.

Suddenly, things were moving faster than in the United States.

"The monitoring trustee and Microsoft have, for example, agreed on a specification for the documentation in Europe, and our technical folks and Microsoft are just now doing that," the Justice Department's Hesse told a U.S. judge in May.

A U.S. judge found in 2000 that Microsoft had broken the law and imposed sanctions, including a break-up of the company. An appeals court threw out that remedy but left the most serious legal violations intact.

Once President George W. Bush took over, his Justice Department reached a settlement with Microsoft that former Clinton Justice Department officials believed would be ineffective.

By May of this year the American process was so troubled that Microsoft and the court started over again in a so-called "reset", taking a cue from what U.S. District Judge Colleen Kollar-Kotelly called "the European Commission's direction".

Microsoft says it never delayed carrying out Commission sanctions and first offered a proposed draft for interconnection software and documentation in 2004.

But the Commission's monitoring trustee found Microsoft's approach "fundamentally flawed".

The Microsoft project to comply with the Brussels sanctions has a colourful, placed-based name typical of those used by the software giant: Project Circle Line, named after the London underground train line.

The company says it involves the intense efforts of 300 people and the last stage, known as Paddington -- one of the stops on the London Circle Line -- will be finished on July 18.

If Microsoft's work meets Commission standards there may be no more fines.

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