Time appears to be running out for Microsoft (MSFT) in its long-running dispute with European Union authorities. The European Commission is close to formally deciding that Microsoft should be fined $2.3 million a day, retroactive to Dec. 15, for failing to give competitors information they need to create products that operate smoothly with Windows. What's more, the commission, increasingly impatient with Microsoft's response, could boost the fine to more than $6 million a day starting in July.
EU Competition Commissioner Neelie Kroes plans to recommend imposing the fines, according to several people involved in the case. An EU spokesman in Brussels confirmed that the full European Commission will issue a decision in July. The last commission meeting for the month is July 19.
"At some point the commission has to impose fines to achieve compliance," says Thomas Vinje, a lawyer at Clifford Chance in Brussels who represents the European Committee for Interoperable Systems (ECIS), an industry group whose members include Adobe Systems (ADBE), IBM (IBM), Nokia (NOK), Oracle (ORCL), RealNetworks (RNWK), Red Hat (RHAT), and Sun Microsystems (SUNW).
ONE MORE CHANCE. A decision against Microsoft would not come as a surprise. But it would mark a further setback for Redmond (Wash.)-based Microsoft, which is under assault on several regulatory fronts in Europe. In 2004, after a five-year investigation, the European Commission decided that Microsoft was abusing its dominance of the market for PC operating systems and fined the company $626 million.
Microsoft is appealing the 2004 decision in the European Court of First Instance in Luxembourg. But in the meantime it is under orders to provide information on what software protocols other companies need to create products that can function fully with Windows. The commission decided in December that Microsoft was not complying with those orders, but gave the company a chance to argue its side of the case before it imposed fines.
Now the commission looks poised to lower the hammer. Even more alarming from Microsoft's point of view, the commission could raise the level of future fines to a maximum of 5% of daily sales. In Microsoft's case, that would be $6 million a day based on first-quarter sales of $10.9 billion. Microsoft can appeal a decision to impose fines, but would risk antagonizing appeals judges who have already ruled that the company should provide information enabling competitors to write software compatible with Windows.
SLOW MOVING. For its part, Microsoft representatives say the company is working hard to satisfy the commission. It has provided five of seven installments of technical documentation according to guidelines from an independent expert hired by the commission, and is aiming to provide the remaining two by July 18.
"Microsoft has committed massive resources to the technical documentation program," Horacio Gutierrez, associate general counsel for Microsoft Europe, says in a statement. "Any fine would be unjustified and unnecessary." Microsoft's efforts to provide the technical documentation may not help its case much, though, if commissioners ask why it has taken the company more than two years to do so.
A fine would hardly be the final chapter in the complex, long-running case. The company's appeals could take years to resolve. In addition, ECIS has filed a separate complaint which accuses Microsoft of planning to extend its dominance of PC software with its new Vista operating system, due out in early 2007. The commission has not yet taken action on that complaint.
If the EU forces Microsoft to pay up, it won't be the end of the world for the software giant. But the added monetary pain will come hard on top of the legal and public relations damage that Microsoft has already suffered in Europe.
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