The European commission is preparing to fine Microsoft a record-breaking â,¬497m (£333m) for abusing its dominance of the personal computer software market.
Representatives of national competition authorities from the 15 European Union governments took less than an hour yesterday to approve the proposed penalty put forward by the EU competition commissioner, Mario Monti. The meeting had been scheduled to last all day.
The penalty was far higher than had been expected. The commission has the power to levy a fine equal to up to 10% of sales, which would in Microsoft’s case mean a fine of $3.5bn, but penalties rarely reach the 10% limit.
The fine tops the previous high of â,¬462m levied against the drugs maker Hoffman- La Roche in 2001 for being the ringleader in a vitamins cartel.
The 20 European commissioners meet tomorrow to give final consideration to the proposal. The members are expected to give their overwhelming backing.
Microsoft’s associate general counsel for Europe, Horacio Gutierrez, responded to the widely leaked figure in a statement last night.
He described the penalty as ”unprecedented and inappropriate”. Commission regulations say that a company must infringe rules ”either intentionally or negligently” and Microsoft argued that it did neither and could not have known it that it was breaking anti-monopoly rules.
But critics of the company noted that Microsoft, which is sitting on a $53bn cash pile, could easily absorb the fine. ”This is a traffic ticket for Microsoft,” said Thomas Vinje of the law firm Clifford Chance, which represents some of Microsoft’s rivals.
Mr Monti issued a draft ruling last week which found that Microsoft had abused its Windows monopoly, harming consumers and competitors in the markets for digital media and server software. The EU is expected also to set limits on the bundling of Microsoft software, demanding that the company offer a version of its Windows operating system without its Media Player software to help competing products on to desktops. It will also order Microsoft to release more of the underlying code for Windows to rivals in the server market.
Microsoft is expected to appeal the ruling in a case that has already dragged on for five years. Settlement talks between Microsoft and the commission broke down last week. The company was reluctant to accept a provision that would have curbed new features on Windows.
Microsoft’s Windows operating system is on 90% of the world’s personal computers, which means it has the power to make or break rival software firms.
The two companies likely to benefit most from the ruling are Sun Microsystems, which makes servers, and RealNetworks, which pioneered software to enable audio and video on personal computers.
Microsoft was found to have abused its monopoly by a US court in 2000, although the tough remedies the judge originally proposed were substantially watered down on appeal. It reached a landmark settlement with the US government in 2002.
Microsoft faces fresh EU inquiries into allegations that its Windows XP system is allowing it to extend its dominance into other technologies such as mobile phones.
Microsoft is also under scrutiny because the next version of Windows, in 2006, is expected to include a search engine that would challenge the likes of Google. — Â