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EC Fines Microsoft $600 Million & Change

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Antitrust Fine for Microsoft Said to Be $613 Million


Published: March 23, 2004

BRUSSELS, March 22 - Antitrust regulators will fine Microsoft 497 million euros ($613 million) on Wednesday, when the European Commission formally rules that the company abused its monopoly in computer operating systems, people close to the company said on Monday.

The fine, which was set late last week after settlement talks with Microsoft broke down, was endorsed by regulators from the 15 member nations of the European Union on Monday.


Microsoft said the fine was too big. "In view of the absence of a clear legal standard under E.U. law, a fine of this size isn't warranted," said Tom Brookes, the company's spokesman in Brussels.

On Tuesday, the fine is to be discussed by senior aides to all 20 commissioners before being brought up at the European Commission's final meeting on the case on Wednesday morning.

Microsoft would then be officially informed of the fine and sent a summary of the ruling by fax, shortly before Mario Monti, the competition commissioner, holds a news conference to announce the decision.

Under the European Union antitrust laws, the commission can set a fine of as much as 10 percent of a company's global sales, which in Microsoft's case would be more than $35 billion. European antitrust regulators, however, have never fined a company the full 10 percent, and Brussels-based lawyers and officials had expected the fine against Microsoft to range from 100 million euros to 1 billion euros.

The biggest previous fine imposed by the commission was 462 million euros, or about $406 million at the exchange rate at that time, against Roche of Switzerland in 2001 for its role in several cartels that fixed prices and market shares of vitamin products in the 1990's. (Seven other vitamin makers were fined lesser amounts.)

Still, some people close to Microsoft had been speculating over the weekend that the commission would not impose a fine at all.

But Amelia Torres, a spokeswoman for Mr. Monti, said: "We have already told Microsoft many times that a negative ruling will incur a fine. A small company could claim it didn't know the rules, but not one the size of Microsoft."

The commission is expected to rule that Microsoft abused the monopoly position of its Windows operating system in two ways. By withholding vital information about Windows from rival makers of software for servers, the company gained an unfair advantage in the separate market for server software. It also competed unfairly by including its Media Player audio-video software as part of Windows. The commission is expected to announce remedies to restore competition in these markets, requiring Microsoft to sell two versions of Windows to PC makers in Europe, one of them with Media Player stripped out.

It would also have to share more Windows code to allow rival makers of server software to compete with Microsoft more fairly, according to people close to the case. Computer servers drive networks of PC's.

These remedies would have more of an impact on Microsoft than a fine, because the company has more than $50 billion in cash reserves and has already set some of that aside for covering legal costs.

After negotiations toward a settlement of the charges collapsed last week, Brad Smith, the chief lawyer for Microsoft, said the company would appeal any ruling at the European Court of First Instance in Luxembourg.


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piffle--a drop in the bucket for them. :angry:

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Here's a followup article from the NY Times:


Paring Away at Microsoft


Published: March 25, 2004

NewsAnalysis The European Commission issued an antitrust ruling against Microsoftyesterday that is intended to force the company to change its fundamental business strategy of bundling new products into its Windows operating system, which runs more than 90 percent of all personal computers.

The ruling imposed a $603 million fine. It also required Microsoft to offer a version of Windows without its Media Player and divulge technical information to competitors so that they can create software for business servers that would work well with Windows.

The impact on the future of the global software industry may well be greater than on the company's immediate business prospects.

The fine is pocket change for Microsoft, which has more than $50 billion in cash in its corporate coffers. The sanctions, according to industry analysts, are not likely to have any significant near-term effect on the computer industry or the market for software that plays music and videos sent over the Internet. And Microsoft executives declared that there would be no changes in their product plans or business practices as a result of the European decision.

But the ruling could set profound new ground rules for Microsoft in Europe, and perhaps in other markets around the world, as well.

If upheld on appeal, it would leave Microsoft with a regulator in Europe standing over its shoulder, scrutinizing what it puts into future generations of Windows and what it leaves out. The antitrust settlement the company reached with the Bush administration in 2001, by comparison, merely gives personal computer manufacturers the ability to place rival software on the Windows desktop, but does not require that Microsoft's bundled software features be removed from Windows.

On its own, the European ruling might be seen largely as a nuisance to Microsoft. Yet it comes as other forces are also weakening Microsoft's grip on desktop computers.

Beyond the moves to open the Windows desktop to rivals, Microsoft faces growing competition from Linux, an operating system that is distributed free. Even more important, Microsoft's dominance is threatened by a shift in computing from the personal computer to technologies like Internet-connected cellphones and Internet-based services offered by Google and similar companies.

"The significance of Europe is not the decision itself, but it adds to the other pressures on Microsoft," said David Yoffie, a professor at the Harvard Business School.

Those pressures may be having some effect. There are signs that Microsoft has altered its practices since the settlement with the Bush administration — and the European ruling could provide a further prod.

Industry analysts note that work on the company's next generation of Windows, expected in 2006 or 2007, emphasizes programming code as building blocks, or modules, that can be removed and snapped into the larger program.

This approach may be paving the way for the day when Microsoft shifts away from its bundling approach. Skeptics, however, say that Microsoft may be adopting this approach simply because it needs to be able to locate and combat security flaws in Windows more easily.

Other analysts say that the Microsoft division responsible for MSN Web sites — and not the Windows division — is working to develop a Web search service to compete with Google. To be sure, Microsoft could eventually decide to fold its search software into Windows, as it has with other products in the past.

Critics and competitors contend that the company, having long used the bundling strategy to protect and extend its Windows monopoly into other software products, will not significantly change its approach.

"How do you really deter Microsoft from pursuing this bundling strategy when they have bet the company on it?" asked Andrew I. Gavil, an antitrust expert at the Howard University law school in Washington.

Timothy F. Bresnahan, a professor at Stanford University who was chief economist for the Justice Department's antitrust division during the Clinton administration, said, "Microsoft sees a new product and says, `We were about to invent that, too,' comes up with its version and bundles the software into Windows." The result, he added, is that "the early leader in some promising new technology is bundled out of the market."

"It's an innovation tax that is a problem for society," Mr. Bresnahan said.


Bundling was at the center of the federal antitrust suit in the United States, filed in 1998 by the Clinton administration. Microsoft lost the case, but a federal appeals court said the charge that the company engaged in anticompetitive tying should be reconsidered. The Bush administration decided not to revisit the tying claim and settled with Microsoft in 2001.


Microsoft contends that putting new things into Windows is good for consumers, even if it is bad for some competitors. It was over the bundling issue that settlement talks with the European Commission broke down in Brussels last week.

For Microsoft, the immovable line in the sand is still its right to add whatever it wants to its dominant product, Windows. "We believe that every company should have the ability to improve its products in the interests of consumers," Steven A. Ballmer, Microsoft's chief executive, said yesterday in a conference call with reporters. "We are protecting the fundamental principle of innovation."

Microsoft executives say that after the bundling issue was taken off the table in the United States, its competitors sought a more sympathetic audience in Europe.

"This was the core issue during several years of judicial review in the United States," Brad Smith, Microsoft's general counsel, said in an interview. "The irony is that in Europe the claimants were the very same American companies that had their day in court in the United States."

The European Commission has ordered Microsoft to offer a version of Windows stripped of its Media Player within 90 days. And it has told the company that within 120 days it must share more technical information with software competitors in the market for server computers, which run corporate networks. Microsoft said it would seek a temporary halt to both sanctions, while its appeal makes its way through the European courts, a process that is expected to take years.

Microsoft's leading competitor in media-playing software is RealNetworks, the early front-runner, whose market share has declined sharply since Microsoft began bundling Windows Media Player into its operating system.

"This would be a step in the right direction, helping to open up the industry further for competition and innovation," said Rob Glaser, chief executive of RealNetworks. But even Mr. Glaser has modest expectations for the immediate impact of the European ruling.

Instead, he pointed to the long-run importance of challenging Microsoft's bundling strategy. "If the Windows operating system is seen as completely mutable — something that anything can be put in — that doesn't mean there won't be innovation in PC software, but it does tend to inhibit it," Mr. Glaser said.

Under the ruling from Brussels, the pared-down Windows without the Media Player applies only to European markets and does not have to be sold for less than Windows with the Media Player.

"If there's no price difference, there will be no impact on PC makers' choices," said David M. Smith, an analyst at Gartner Inc.

The ruling's demand that Microsoft share more technical information with competitors in the server market, like Sun Microsystems, I.B.M. and others, is intended to ensure that Microsoft does not unfairly extend its monopoly beyond the desktop to the server market. The United States settlement also required that Microsoft share some technical information, but the European order requires that more information be shared.

Microsoft contends that the European order amounts to an unwarranted and sweeping grab of its intellectual property rights. It also says the unbundling ruling, if imposed, is an assault on its valuable Windows trademark.

"It will be a derivative product that the European Commission is designing," Mr. Smith, Microsoft's general counsel, said. "It will cause confusion to consumers, and whatever it is, it's not Windows."


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I'm on the side with Microsoft on this one. $600 million fine is insane and "the punishment doesn't fit the crime" as the old saying goes. What was the crime? Being an "illegal monopoly"? Pffft. Give me a break :wacko:


Ballmer: All companies should be allowed to innovate

Microsoft Chief Executive Steve Ballmer vowed to fight the European Commission's antitrust ruling, arguing that all companies, even ones with a near monopoly, have a right to improve their products.

Ballmer's comments follow a decision by the European Commission earlier Wednesday, which involved ordering Microsoft to offer a version of Windows that comes without the Windows Media Player and to share enough of its intellectual property to enable server industry rivals to sell machines that can effectively interoperate with Windows-based computers. The commission also imposed a record $613 million fine against the software behemoth.

"There is an important principle at stake in this case: We believe that every company should have the ability to improve its products to meet the needs of consumers," Ballmer said during a conference call with journalists. "We recognize the sort of special position our company has, but nonetheless we think we should have that ability to improve our products, subject to the appropriate guidelines."

As a result, the company said, it plans to appeal the case to the European Court of First Instance in Luxembourg and will also ask that court to put on hold most, if not all, of the remedies ordered by the European Commission.

Microsoft executives tried to make the case that the European ruling, if it comes to pass, will hurt consumers.

"Even if one takes away the multimedia code and, as RealNetworks has suggested, installs their player in its place, there will remain over 20 features in the Windows operating system that will not function," Microsoft's chief lawyer, Brad Smith, said during the conference call. "There will remain many European Web sites that will not function properly."

Smith noted that the same competitors that sought action from the European Commission had already tried and failed to get a similar action from U.S. courts.

"Our competitors had their day in court, and it's unfortunate that after that day came and went they simply chose to move across the Atlantic to try to have a day in another court," Smith said.

The ruling is not expected to immediately change the way Microsoft thinks about its future products, including Longhorn, the next major revision to Windows.

"We're not doing anything different than we were yesterday in terms of how we think about new design," Ballmer said. Both he and Smith noted that Microsoft's development efforts already have been influenced by the consent decree in the U.S. v. Microsoft case.

"We've had lawyers already giving legal advice to our development teams about the development of future versions of Windows," Smith said. "That advice would change if, and only if, the European Commission is now saying that the law in Europe is now different than the law in the United States."

A Microsoft representative said the company would have to review the details of the ruling to see exactly how its current and future products might be affected.

Although Microsoft and the European Union appear to be at loggerheads on the issue of future development, Ballmer indicated that there could be an opportunity to settle the case once a European court has weighed in, noting that that's what transpired in the U.S. case. Smith pointed out that there were extensive settlement talks that failed to reach a pact in 1999 but that parties were able to find middle ground within a few months after an appeals court issued its decision in the summer of 2001.

"One can never predict the future, but it would not surprise us if the path in Europe were to follow something similar to what we saw in the United States," Smith said.

Nonetheless, while Ballmer and Smith said the company remains open to settling the case, Microsoft signaled it is also prepared for a long litigation process.

"At the end of the day, we do believe there are important principles at stake," Smith said. "Even though the litigation process may well last four or five years, we think those are principles that are worth standing up (for) and defending."


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The European Union shouldn't be allowed to fine American-based companies.

Microsoft may be a "monopoly", but it's because they created and promote a superior product (namely their OS line of products).

Microsoft uses it's hard earned money to fund R&D into their operating system.  It innovates. It evolves.  Europe evidently doesn't. It's lost in the dark ages in this particular case  :wacko: 

so the EU shouldn't fine amerikan-based firms? what recourse would you suggest for the EU if they think something's very wrong w/whatever 'foreign'-made shit?

MS created/promoted a SUPERIOR product? :lol: do you think all those sites on the 'net helping people (for free!) w/huge MS and/or windoze problems are there for a laugh?

i hope you're kidding but fear you're not. yes, i'm on windoze cause way back when, i was too uninformed to know better (and believed the hype--dint even know i had a choice, so prevalent were the adverts et al). i began to educate myself when i quickly realised it wasn't my brand-new dell having problems, it was the OS installed w/i. ('my next machine will be a Mac') even my BF's (6 years old) runs better, faster & is much more secure/stable.

since i realised what a resource hog windoze is (R-click 'my computer' and click on 'properties' and then 'performance'), i use non-ms/msn apps whenever i find another choice. read my rant from last night...it's obvious you have no such problems. lucky you.


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Microsoft may be a "monopoly", but it's because they created and promote a superior product (namely their OS line of products).  ************************************

Ballmer: All companies should be allowed to innovate

Microsoft Chief Executive Steve Ballmer vowed to fight the European Commission's antitrust ruling, arguing that all companies, even ones with a near monopoly, have a right to improve their products.

I dont think Microsoft is superior to Apple, but I agree that all companies, even monopolies, should have the right to innovate.

I dont know the merits of the EU's case against Microsoft, nor enough about Microsoft 's heavy-handed business practices there.. but Im told from my friends who ued to work at Nortel, that their old boss was behind it, and that he's even worse.

I thought the government's case in the US was weak, and I thought the pressure from Sun, etc, was all about their self-interest. I doubt if consumers are going to see any benefit from it.

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if Micrsoft wants to operate in the EU market, then they will have to operate under the same rules as everyone else
that is correct sir! I don't know how it works on the other side of the Atlantic but that's how it works here
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I don't know how it works on the other side of the Atlantic but that's how it works here

does this have something to do w/insurance? one of the things/difs i learnt here was that EVERYTHING is insured. and as you prolly know already, we just sue. :lol:

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The European Union shouldn't be allowed to fine American-based companies.

to clarify: i'm glad the EC fined m$ (but it should have been for much much more). and i'd hope they'd fine the shit out of every other amerikan firm they find objectionable for wotever reason. there...i've said it. :lol::lol::lol:

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:lol: --->method :lol:

i ran across some interesting stuff about m$'s future plans on slashdot from this article like '...Ballmer said Microsoft spends about 12 percent of its media budget on online advertising, and that he orders his staff to "saturate" that market first and foremost...'

ballmer again: "I want to make sure (a user) can't get through ... an online experience without hitting a Microsoft ad.' fucking lovely.

comment fr /. '$600 million is about 1% of their cash reserve, from what I understand...Just part of the cost of doing business, trivially affordable.'

this comment had me LMAO, a parody of the article linked above but one i wish i wrote: '...But Microsoft is now turning its considerable might toward catching up...in what many see as the next depressing confirmation that there is nothing that can be achieved that Microsoft won't wreck with some awful code, a stack of ripped-off eyecandy and several billion dollars worth of marketing... The European Commission slapped Microsoft with a $613 million fine....and ordered sanctions that go well beyond the company's antitrust settlement with the United States. The company has vowed to raise an army of the undead, to destroy the continent in a reign of fire, to sow its fields with salt and leave no stone atop another, pending an appeal by its lawyers.'


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another example of why m$ doesn't have their customers' best interests at heart, microsoft's hidden files (those on your machine).

in brief: '...your name, address, and zip code aren't enough for the boys in Redmond...there are folders on your computer that m$ has tried hard to keep secret. w/i these folders you will find...(a log of all) the sites you have ever visited... ALL of your e-mail correspondence, even after you've deleted them from your trashbin.'

a truly helpful site w/excellent instructions for uncovering these files 'and prepare for a walk down memory lane that you didn't plan on.'

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