E.U. Fines Microsoft $357 Million

Software Firm Penalized for Not Sharing Windows Data

Microsoft Corp. Chief Executive Steve Ballmer delivers his keynote speech during Microsoft Worldwide Partner Conference at Boston Convention & Exhibition Center in Boston, Tuesday, July 11, 2006. (AP Photo/Chitose Suzuki) (Chitose Suzuki - AP)

PARIS, July 12 -- The European Commission fined Microsoft Corp. $357 million on Wednesday, a move that prolonged the software giant's legal woes and prompted the technology industry to criticize European regulators for stifling innovation.

The fine is a result of Microsoft's failure to comply with orders issued more than two years ago to provide the technical data needed by other companies to allow their products to interact with the Windows operating systems, the commission said.

European Competition Commissioner Neelie Kroes said that Microsoft was taking too long to comply with demands to make "complete and accurate" technical data available to competitors so they could design their products to interact with Windows, which runs more than 90 percent of the world's personal competitors.

"The European Commission cannot allow such illegal conduct to continue indefinitely," Kroes said at a news conference in Brussels. "No company is above the law."

Brad Smith, Microsoft's general counsel, said the software company had tried to comply but apparently was not able to satisfy the commission's demands. The company, which Smith said was close to meeting its last deadline, had dedicated more than 300 employees to the effort and had turned over more than 12,000 documents related to the compliance effort to the commission. Microsoft said it would appeal the fine through Europe's second-highest court, the Court of First Instance in Luxembourg, a process that the company said would take two to three years.

Several technology organizations joined Microsoft in criticizing the fine and said the European Commission had created an over-regulated environment that would stifle innovation.

"The precedent is greatly concerning," said Mike Wendy, spokesman for the Computing Technology Industry Association, which represents 20,000 firms, including Microsoft, Intel Corp., Xerox Corp. and Lenovo Group Ltd.. "It reveals the European Commission's flawed process in arriving at regulatory and compliance matters as it seeks to impose itself into the industry."

Smith cited other cases, such as the French government's legislation requiring Apple Computer Corp. to make its popular iTunes music store more compatible with other portable devices and Germany's recent raid on Intel offices, as part of an investigation into anti-competitive practices.

"If European regulators are going to dive into this degree of technical complexity with American companies, we need earlier and more concrete guidance," Smith said. "It doesn't work simply to be told after the fact what we did wrong."

Microsoft shares closed yesterday at $22.64, down 46 cents, or 2 percent.

Although Microsoft settled an antitrust suit with the Justice Department in 2001, a similar one in Europe drags on. The dispute Wednesday stemmed from a March 2004 decision by the European Commission to fine Microsoft $603 million, ruling that it was guilty of abusing its dominant market position to crush competitors and perpetuate a "near monopoly" in computer operating software.

The panel ordered Microsoft to offer its Windows operating system without Windows Media player. It also ordered the company to make available technical data for competitors to "interoperate" with Windows at a fair price.