EU fine won’t end probes of Microsoft

Times Staff Writer

The record $1.36-billion fine Microsoft Corp. must pay the European Union won’t buy the software company much peace.

Wednesday’s penalty, which amounts to almost one-third of Microsoft’s last quarterly profit, officially closes a nine-year antitrust battle with European regulators that has cost the company a total of $2.5 billion in fines.

But those regulators are still pursuing two new investigations into the software giant’s business practices. They also loom as an obstacle to Microsoft’s proposed takeover of Yahoo Inc., which would need approval in Brussels and Washington.


“Antitrust is a chronic condition of doing business for Microsoft,” said Matt Rosoff, an analyst at research firm Directions on Microsoft. “I don’t think that’s going away.”

In 2004, the European Union found that Microsoft had abused its dominance in personal computer operating systems to limit competition. It ordered the company to make technical information available to firms so their software would work with Windows and other Microsoft products.

European regulators levied Wednesday’s fine after determining that, for three years after the ruling, Microsoft had charged “unreasonable prices” for that information.

Neelie Kroes, EU commissioner for competition policy, sharply criticized Microsoft on Wednesday for not living up to its promises to regulators.

“Talk is cheap. Flouting the rules is expensive,” she said at a news conference in Brussels. “We don’t want talk and promises. We want compliance.”

Kroes’ tough stance shows that the European Commission, the EU’s antitrust regulator, remains unhappy with Microsoft and will aggressively pursue the two new investigations it launched in January, said Harry First, a New York University law professor who is writing a book about the company’s antitrust litigation.


“It’s a lot of zeros on that fine,” he said.

Microsoft said it was reviewing the commission’s action.

“The commission announced in October 2007 that Microsoft was in full compliance with the 2004 decision, so these fines are about past issues that have been resolved,” the Redmond, Wash.-based company said in a statement.

Microsoft has paid about $10 billion in fines and settlements with competitors over antitrust issues in Europe and the United States, Rosoff said. It’s the world’s largest software maker, generating $51.1 billion in revenue and $14.1 billion in net income during its fiscal year ended June 30.

Microsoft is right to try to put the 2004 case behind it, said analyst Charles Di Bona of investment firm Sanford C. Bernstein & Co.

“It’s obviously not a great use of cash, but it doesn’t impair them financially,” he said.

The fine tops the commission’s previous record of $605 million, also against Microsoft, for the original 2004 antitrust abuses. The commission also fined Microsoft $351 million for failure to comply with other aspects of the decision.

The $351 million and $1.36 billion penalties are the only times in the European Commission’s 50 years of existence that it had to fine a company for failing to comply with an antitrust ruling, Kroes said.

The fines demonstrate the tougher stance European regulators have taken on antitrust in recent years compared to the Bush administration.


Microsoft Chief Executive Steve Ballmer and Kroes met last fall at a restaurant near her hometown of Rotterdam in the Netherlands and began the process of settling the 2004 antitrust case. Ballmer agreed to drop Microsoft’s appeal and lowered prices for access to the technical data needed to make products work with Windows.

Kroes said that until that decision, Microsoft had overcharged for the information.

“Microsoft’s behavior did not just harm a few individuals or a handful of big companies,” she said. “Directly and indirectly this had negative effects on millions of offices in companies and governments around the world.”

In January, European regulators started two antitrust probes to determine whether Microsoft had used its dominance in word processing and spreadsheet programs to stifle competition. Last week, Microsoft announced it would make tens of thousands of pages of technical documentation available free in hopes of heading off new antitrust lawsuits.

Kroes said the investigations launched in January were not completed.

“As always, we will take into account any changes that Microsoft makes to its business practices that are relevant to those investigations,” she said. “But again, I stress that a press release . . . does not necessarily equal a change in business practice.”

Analysts said concerns about Microsoft’s abuse of its dominance in operating systems and office software didn’t necessarily mean it wouldn’t gain European approval of a takeover of Yahoo. That’s because Google Inc., not Microsoft, is the dominant player in online advertising.

Google executives have said Microsoft’s past behavior shows it can’t be trusted. They have begun raising concerns that Microsoft could leverage its operating system dominance to gain unfair advantages in areas such as free Web e-mail and instant messaging.


“This is such a different issue, it’s hard to predict,” Rosoff of Directions on Microsoft said of review of a Microsoft-Yahoo deal.

“But if Microsoft had never been in court in Europe on antitrust in the first place, they’d have a better chance of getting it approved.”