New fines threat escalates trans-Atlantic trade fight

The European Union today escalated its trans-Atlantic fight with Microsoft today, threatening new multi-million-euro fines against the software maker over claims it fails to offer rivals a fair deal on licenses for helping servers work with Windows.

In response, Microsoft charged that the treatment it receives from the EU is unmatched around the world and harmed Europe’s efforts to become a thriving high-tech economy.

The EU said Microsoft could face fines as high as €3m a day, accusing the software company of trying to protect its interests by overcharging rivals for complete and accurate interface documentation, which would allow them to interoperate with Windows PCs and servers, on reasonable and non-discriminatory terms.

The EU complained that three years after a landmark antitrust ruling to open up the market, the US software giant still refused to cooperate. “This is a company which apparently does not like to have to conform with antitrust decisions,” said EU Commission spokesman Jonathan Todd.

Microsoft retorted that the antitrust office insisted on one-way traffic and refused to discuss the outstanding problems as reasonable partners.

“You have to have real dialogue, in a room with people on both sides of the table,” said Microsoft General Counsel Brad Smith, calling it a heavy-handed approach that stifles business.

A more open tack, Smith said in a telephone conference, “is what we have in other capitals, in other countries and that is what we need in Brussels if Europe is going to have an economy that genuinely fosters technology and innovation”.

The Commission said that Microsoft was itself using heavy-handed tactics to choke rivals in the software sector. It said it continued to disregard the EU ruling to open up key information to others in the industry.

Under a so-called “statement of objections” released today, the EU’s executive commission said there was “no significant innovation” in the requested information Microsoft had to provide rivals.

It also rejected 1,500 pages of submissions by Microsoft over the past three months and said the company’s price proposals were unreasonable.

“I am therefore again obliged to take formal measures to ensure that Microsoft complies with its obligations,” EU Antitrust Commissioner Neelie Kroes said in a statement.

Smith complained that Microsoft had asked for feedback on its information half a year ago and only today received a reply thinly veiled in a threat.

“We’re disappointed that this feedback is coming six months later and in its present form,” said Smith. “You cannot reach an agreement if you are just talking to yourself.”

He added: “The findings appear to be an attempt to regulate the pricing of our intellectual property rights on a global basis,” something that would go beyond the jurisdiction of the European Union.

Ronald Cass, chairman for the Washington-based Centre for the Rule of Law, said the EU “has taken another step toward turning successful businesses into regulated utilities”.

“The commission’s new effort, if pursued, will undermine innovation and take Europe further away from the sort of predictable, stable, sensible legal rules that define the rule of law,” Cass said.

The EU insisted it did not want to douse the spirit of initiative.

“The commission does not want Microsoft to have to give away the fruits of its research for free,” said Todd.

“Microsoft is perfectly entitled to a fair share of the results of its innovation. However, the commission decision does not allow Microsoft to charge for interoperability information based on its own dominant position in the PC software market.”

The company has four weeks to reply to the commission’s preliminary finding, after which the EU could impose fines up to €3m a day, Todd said.

Microsoft is challenging the EU’s original 2004 antitrust order at the EU’s Court of First Instance. The ruling found the company broke competition law for abuse of a dominant position and fined the software maker a record €371.5m.

“It is the first time we have been confronted by a company that has failed to comply with an antitrust decision,” said Todd. “We are in unknown territory.”

To remedy Microsoft’s antitrust abuse, the EU ordered the company to sell a copy of Windows without its media player software and told it to share communications code and information with rivals to help them develop server software that worked smoothly with Microsoft’s ubiquitous Windows desktop operating system.

EU regulators fined Microsoft another €208m last July for failing to supply the “complete and accurate” interoperability information required.