EU hits Microsoft with unprecedented fine

European Competition Commissioner Neelie Kroes at the news conference announcing the fine. Picture / Reuters

BRUSSELS - European Union regulators fined Microsoft €280.5 million ($578 million) on Wednesday for defying a 2004 antitrust ruling, and warned the company to comply or face bigger fines from next month.

The tough new penalty is the first of its kind and comes on top of a record €497 million fine the Commission imposed in its landmark antitrust decision against Microsoft in March 2004.

"Microsoft has still not put an end to its illegal conduct. I have no alternative but to levy penalty payments for this continued non-compliance," Competition Commissioner Neelie Kroes said. "No company is above the law."

The fine covers a period from December 16 to June 20 and was computed by multiplying 187 days of violations at €1.5 million per day. It fell short of a possible maximum €2 million per day.

Microsoft faces an increased further fine of up to €3 million a day if it continues not to comply with an order by July 31. The Commission requires Microsoft to give information to rival server software makers to make their applications run smoothly with Microsoft's ubiquitous Windows operating system.

The move signals the Commission's determination to force Microsoft to obey its order to share key information with rivals and a loss of patience after the company had two years to comply and used every available legal avenue to spin out the process.

The Commission's hardline approach contrasts with that of the United States which in 2000 had similar findings against Microsoft but is still awaiting technical documents from the company as ordered by the US Justice Department in 2002.

Within months after the Commission first threatened the fine, Microsoft started working quickly to come into compliance.

According to an agreed-upon schedule, Microsoft is supposed to deliver the final results on July 18.

Microsoft said it has made massive efforts to comply with the Commission's 2004 ruling and now has 300 people working to complete its package by the deadline.

It calls the fine unjustified, but says that will not slow its effort to comply. Microsoft, which has appealed every ruling against it so far by the Commission, can appeal this ruling to the European Union's Court of First Instance.

The court is already considering an underlying challenge by Microsoft to the Commission ruling, and conducted a hearing in April on it.

After years of investigation, the Commission found in 2004 that Microsoft used near-monopoly power from its Windows operating system to harm competitors making "work group servers", which run printing and sign-on services in offices.

The Commission ordered Microsoft to give rivals the information needed so their work group servers could compete on a level playing field with Microsoft's own. Microsoft must help its rivals interconnect smoothly with Windows.

Microsoft was supposed to ready the information for competitors by June 2004.

The company tried to have the sanctions suspended until it could complete a court challenge to the 2004 decision, but late that year a judge said no.