Microsoft to appeal $1.3 billion EU fine

by Elizabeth Montalbano

May 9, 2008 —

Microsoft is appealing the US$1.3 billion (€899 million) fine imposed
on it by the European Union for failing to honor a 2004 antitrust agreement,
the company said Friday.

Microsoft spokesman Jack Evans said via e-mail Friday that the company has
filed an application with the Court of First Instance in Luxembourg to annul
the European Commission (EC) decision of Feb. 27, which imposed the fine against
Microsoft.

"We are filing this appeal in a constructive effort to seek clarity from
the Court," the company said in an e-mailed statement. Microsoft is not
commenting further.

The Commission could not be reached immediately for comment Friday.

According to the Wall Street Journal, Microsoft's appeal only covers the imposition
of the fine, not the underlying conduct. Since the company won't comment, it's
impossible right now to know its reasons for filing an appeal.

Historically, Microsoft has resisted compliance with its EU antitrust ruling
and has been reluctant to acknowledge its guilt in the case. However, some recent
moves by the company to be more open about its technology practices and to release
documentation for proprietary protocols to third parties seemed to indicate
it has become more willing to comply with the ruling.

Thomas Vinje, a partner specializing in competition and intellectual property
at Clifford Chance in Brussels, said he finds Microsoft's legal action surprising
at a time when the company is trying to repair its "strained" relationship
with EU antitrust officials.

"Especially in light of its effective admission that it was seeking unreasonable
fees for the information required to be disclosed by the European Commission,
there really can be no doubt that Microsoft was refusing to comply with the
European decision and that the Commission was correct to fine it for that refusal,"
he said in an e-mail.

Vinje added that it would be better for market competition and the industry
overall if instead of initiating another court battle, Microsoft would focus
its attention on complying with the EU agreement. "Only then will Microsoft
-- and the industry and software consumers -- be able to move on from this sorry
saga," he wrote.

Microsoft finally came into compliance with its EU antitrust ruling -- which
originally surrounded Microsoft's bundling of Windows Media Player into the
Windows client OS -- in late October 2007. Microsoft had fought for several
years to overturn the original ruling and imposed fine of then around US$600
million (€497 million), but lost its appeal in September 2007.

When the EU imposed the latest fine, which was for noncompliance up to Oct.
22, 2007, Microsoft said it would review the action. The February fine punished
Microsoft for failing to license protocols for communicating with its software
-- primarily its Windows OS -- to open-source developers at what the EC considered
a fair price.

The latest fine came less than a week after Microsoft tried to appease the
commission by unveiling sweeping changes in the way it will give third parties
access to technology protocols for its Windows and Office products. The plan,
which Microsoft CEO Steve Ballmer hailed as a "significant change"
in how the company shares information, called for publishing, on its Web site,
documentation for APIs (application programming interfaces) and communications
protocols that are used by high-volume products such as Windows client and server
OSes, Office and other business software.

Since February, Microsoft has published tens of thousands of pages of documentation
for protocols online and made them openly available to developers. It has said
it will continue on this path to promote more interoperability between its products
and those of third parties.

To date, Microsoft has faced nearly $2.6 billion (€1.7 billion) in antitrust
fines in the EU.

IDG News Service