/ 31 March 2006

Sword of Damocles hangs over Microsoft

Microsoft said at the start of a final day of hearings with European Union (EU) regulators on Friday that it was more optimistic about its antitrust battle and still hoped to stave off fines of â,¬2-million ($2,4-million) a day.

The hearing — packed with well over a hundred lawyers and officials — is the company’s last chance to defend itself before the EU decides whether to levy the fines.

EU regulators claim the company still has to meet the terms of a two-year-old antitrust order to share technical information with rivals that would help them make software compatible with Microsoft Windows.

Company lawyer Brad Smith said the dialogue between the EU’s executive Commission and Microsoft was constructive during Thursday’s first day of hearings. ”I only wish we could have had that kind of dialogue sooner,” he said.

”I am more optimistic than when I arrived yesterday [Thursday] that this type of constructive dialogue can in fact lead to a real solution.”

Smith said on Thursday that fines were not the answer and said the US software maker had gone beyond complying with the EU’s 2004 antitrust order that also forced Microsoft to hand over the EU’s largest ever antitrust fine of â,¬497-million ($613-million).

The EU has threatened additional daily fines, backdated to December 15, saying the technical manual Microsoft provided that month needed a radical overhaul to make it usable.

EU Competition Commissioner Neelie Kroes warned earlier this month that the company was on course for large fines if it kept up its recent conduct.

The US government wrote to Kroes, two other senior officials and EU governments on Monday about the Microsoft case, EU and US officials said on Friday.

The US mission to the EU said it merely wanted to point out that Microsoft’s allegations that antitrust regulators lacked transparency and fairness ”if accurate, would be of substantial concern to the US”.

The mission stressed that it was not taking a position on the case and it was normal for both sides to be in regular contact about business issues.

EU spokesperson Jonathan Todd would not comment on the contents of the letter, describing it as ”an informal paper that did not have any official status” and saying that the EU and the US usually cooperated closely on antitrust issues.

Microsoft has complained that the EU wrongly withheld documents it needed to challenge the 2004 ruling at the EU’s second-highest court in late April. It alleges that EU officials and Microsoft rivals may have influenced a report from an independent monitor that criticised the company’s efforts to follow the order.

Thomas Vinje, a lawyer for an industry group of Microsoft rivals — the European Committee for Interoperable Systems — insisted Microsoft was still not complying with an EU order to share technical information with its rivals.

”There is no compliance yet and it is about time there was compliance,” he said before addressing the hearing.

He said the technical manual Microsoft gave EU regulators was ”absolutely clearly not good enough”.

”Everybody who’s looked at it other than Microsoft and paid witnesses has said it’s not good enough.”

The EU has rejected Microsoft’s claims that regulators had not been clear and consistent about what they were looking for, saying it has clearly spelled out Microsoft’s obligations in the original 302-page antitrust order.

Microsoft told the hearing on Thursday the technical manual that an independent monitor branded ”unusable” met industry standards. Six technology companies testified that they were using the manual to create software compatible with Microsoft’s products. It named four of them as EMC, StarBak Communications, Tandberg Television and Network Appliances.

The EU Commission maintains that many companies had said the information Microsoft provided was not suitable.

Software producers involved in the case — such as Sun Microsystems, IBM, Oracle and Novell — and industry groups that back the EU will also have a chance to speak

at the hearing on Friday. – Sapa-AP