Microsoft Yields to European Regulators

By Catherine Rampell
Washington Post Staff Writer
Tuesday, October 23, 2007

Microsoft yesterday capitulated to European Union regulators, ending a decade-long antitrust battle that some say could shape how U.S. companies operate in Europe.

As part of the settlement, the world's largest software firm agreed to abide by the terms of a Sept. 17 European court decision that requires the company to slash the royalties it is paid for access to information needed to create software that can run on the Windows operating system. Microsoft, which has paid $956 million in fines to the European regulators, may be ordered by the end of the year to pay an additional $1.58 billion.

This battle, one of many Microsoft has fought around the world, was considered a test of wills and reflects a gradual softening of Microsoft's approach to antitrust challenges.

The European Commission, the executive branch of the E.U., began investigating Microsoft for anti-competitive practices in 1998 after Sun Microsystems complained that Microsoft would not share technical data needed for creating programs that worked with Windows. In 2004, the commission ordered Microsoft to pay a record $613 million fine, divulge information to its rivals to allow their products to operate with Microsoft's software, and offer a version of Windows that didn't come with Windows Media Player. In 2006, when the commission determined that Microsoft hadn't fully complied with the 2004 ruling, regulators started imposing additional daily fines.

Last month, Microsoft lost its appeal of the commission's 2004 ruling.

"Now that Microsoft has agreed to comply with the 2004 Decision, the company can no longer use the market power derived from its 95 percent share of the PC operating system market and 80 percent profit margin to harm consumers by killing competition on any market it wishes," Neelie Kroes, the E.U.'s competition commissioner, said yesterday in a statement to reporters.

Some analysts said the ruling may force companies to tread carefully when considering how they sell their products, or the extent to which they cooperate with rivals when selling their products overseas.

Under the agreement, Microsoft will charge software developers a one-time fee of $14,300 to access its technology. Competitors that use Microsoft's protocols in their products will pay 0.4 percent of their revenue to Microsoft, rather than the 5.95 percent Microsoft had originally demanded.

Microsoft had been a fierce fighter. Shortly after the 2004 decision, the company denounced the ruling. "The commission is seeking to make new law that will have an adverse impact on intellectual property rights and the ability of dominant firms to innovate," Microsoft said at the time. "This adverse impact will not be confined to the software industry or to Europe."

But yesterday's concession indicates how the company's approach has changed.

"The perception had been that several years ago they would fight these things to the death, when now they're clearly being more judicious in making those decisions," said Charles Di Bona, an analyst at Sanford C. Bernstein. "The company is now fairly forward-looking . . . and they want to get this behind them and go forward."

Bernstein's parent company owns Microsoft shares.

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