Microsoft fined millions

The European Commission has fined Microsoft 497 million Euros for breaking European Union competition law by abusing its near monopoly position in the PC operating system market.

Because the illegal behaviour is still ongoing, the Commission has ordered Microsoft to disclose to its competitors the interfaces required for their products to be able to ‘talk’ with the ubiquitous Windows OS within 120 days. Microsoft is also required, within 90 days, to offer a version of its Windows OS without Windows Media Player to PC manufacturers (or when selling directly to end users).

‘Dominant companies have a special responsibility to ensure that the way they do business doesn’t prevent competition on the merits and does not harm consumers and innovation ‘ said European Competition Commissioner Mario Monti.

‘Today’s decision restores the conditions for fair competition in the markets concerned and establish clear principles for the future conduct of a company with such a strong dominant position,’ he added.

The EC said that Microsoft abused its market power by deliberately restricting interoperability between Windows PCs and non-Microsoft work group servers, and by tying its Windows Media Player (WMP), a product where it faced competition, with its ubiquitous Windows operating system.

This illegal conduct, it claimed, enabled Microsoft to acquire a dominant position in the market for work group server operating systems. In addition, it said that Microsoft’s conduct has significantly weakened competition on the media player market.

Microsoft retorted by claiming that its proposals to settle the European Commission investigation would have provided more choices for European consumers and more opportunity for software companies than the official decision announced in Brussels, Belgium, by the European Commission.

‘We worked hard to reach an agreement that would address the European Commission’s concerns and still allow us to innovate and improve our products for consumers,’ said Steve Ballmer, chief executive officer of Microsoft.

‘We respect the Commission’s authority, but we believe that our settlement offer from last week would have offered far more choices and benefits to consumers.’

The company will seek legal review of the Commission’s decision in the Court of First Instance in Luxembourg, according to Brad Smith, senior vice president and general counsel of Microsoft.

During months of discussion and settlement negotiations leading up to today’s decision, Microsoft offered a number of proposals to address issues regarding interoperability and the integration of media player functionality into Windows. The company proposed to provide competitors with access to its technology.

In addition, under Microsoft’s proposed settlement, any personal computer sold with the Windows operating system also would have carried three non-Microsoft media players, leading to the distribution of more than 1 billion competing media players over the next three years. At the Commission’s insistence, many of the provisions offered in Microsoft’s proposed settlement were worldwide in scope.

‘We have acted responsibly while seeking to build the best products we can to meet the needs of our customers,’ Smith said.

‘We believe that the Commission’s decision would actually reduce consumer choice and hurt European software developers.’ He added, ‘We want to resolve these issues as quickly as possible, and we look forward to the possibility of continuing these discussions as this case moves forward.’

According to Microsoft research, consumers want greater functionality and ease of use from technology. And, it claims, a broad majority of European consumers believe that Windows Media Player should be included in Windows.

The Commission’s decision decreases Windows functionality and limits the technology integration that is in the interest of consumers, it says.