This week, European Commission (EC) regulators fined Microsoft 280.5 million euros (US$356 million), adding to the 497 million euros ($630.7 million) the company has already been forced to pay.
Noncompliance with a mandate to disclose technology documents is the official reason for the fine, yet the deadline for such compliance has not yet passed. This bizarre situation should serve as a warning to anyone thinking of doing business in Europe, and it should make the Europeans seriously question the legitimacy of their so-called “competition” policy.
In March 2004, the EC ruled that in addition to paying the record 497 million euro fine, Microsoft had to sell a copy of Windows without Media Player software and hand over the specifics of its Windows server technology to rivals. Both these mandates were meant to correct Microsoft’s supposedly harmful market power.
Of course, that supposition is highly suspicious, and the directives are currently under appeal at the European Court of First Instance. Take, for example, the idea of offering consumers a product with less functionality.
As of late April 2006, Microsoft sold 35 million units of regular Windows, but only 1,787 copies of the Eurocrat-designed Windows without Media Player. Of those 1,787 copies sent to retail shops, no one knows if any consumers purchased even a single copy. The upshot is that EC bureaucrats created a wildly unpopular product and wasted a lot of time and money that could have been spent creating new innovative products for consumers. Then there’s the issue of handing over Microsoft’s intellectual property, the reason for this week’s fine.
In 2000, Microsoft figured out how to create a distributed computing cluster that would work incredibly well with thousands of computers, a major breakthrough in computing technology. Other vendors have not been able to replicate this success.
For instance, Sun Microsystems can only offer a similar solution using four computers and Novell can only do it with 150. It’s not hard to understand how Microsoft’s competitors would like to be able to view and copy Microsoft’s patented invention, as they have failed to find the secrets through reverse engineering. With their ruling, EC regulators offered up the secrets on a silver platter.
Amiss in Brussels
This part of the ruling was a major setback for Microsoft, but the company complied nevertheless, offering to license the source code. Since competitors didn’t want to pay for the code, Microsoft provided seven versions of technical documentation that independent experts from the European software industry said met or exceeded industry standards. Still, the EC wasn’t happy, and in October 2005, a trustee was appointed to oversee the process. Together, the trustee and Microsoft agreed on a specific set of objectives and dates for completion.
So far, Microsoft has met six of the seven milestones and the final completion date, July 24, 2006, has not yet passed. This raises the question of why Microsoft is facing the new fine. The company has complied with the orders and is following the official timeline. Something is obviously amiss in Brussels, making antitrust chief Neelie Kroes’ division look more like a kangaroo court than a respectable institution.
It is not justifiable to fine a company for work not done before the deadline for accomplishing it has passed. Why the EC made this decision is unclear, but some newspapers, such as the Wall Street Journal, have speculated that the regulators wanted to leave for summer vacation, and they needed to deal with it before they left. If that’s the case, Kroes and her entire division should be red-faced, or perhaps even let go.
The appeals court will have yet one more piece of evidence that the case against Microsoft has been less about promoting competition and more about simply attacking a strong American company that has created innovative technologies that its competitors would like to copy.
The European Court of First Instance heard the appeal of this case in April and is expected to issue a decision later this year or next year. The justices who presided over the case seemed to see through many of the EC’s arguments. If they are watching the current actions of the EC, that should solidify their viewpoint.
Sonia Arrison, a TechNewsWorld columnist, is director of Technology Studies at the California-based Pacific Research Institute.