05
Sat, Oct
2 New Articles

European Commission Imposes $1.3 Billion Penalty on Microsoft

Standards Organizations
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

The (European Union's) European Commission today imposed a penalty payment of  $1.3 billion (€899 million) on Microsoft for non-compliance with its obligations under the Commission's March 2004 decision prior to October 22, 2007.

Today's decision, adopted under Article 24(2) of Regulation 1/2003, finds that, prior to 22 October 2007, Microsoft had charged unreasonable prices for access to interface documentation for work group servers. The 2004 decision, which was upheld by the Court of First Instance in September 2007, found that Microsoft had abused its dominant position under Article 82 of the EC Treaty and required Microsoft to disclose interface documentation, which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers at a reasonable price. (The Commission imposed a fine at that time of €497,196,304, or $740 million at today's conversion rates.)

"Microsoft was the first company in 50 years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision," said European Competition Commissioner Neelie Kroes. "I hope that today's decision closes a dark chapter in Microsoft's record of non-compliance with the Commission's March 2004 decision and that the principles confirmed by the Court of First Instance ruling of September 2007 will govern Microsoft's future conduct."

The Commission's decision of March 2004 requires Microsoft to disclose complete and accurate interoperability information to developers of work group server operating systems on reasonable terms.

Initially, Microsoft had demanded a royalty rate of 3.87 percent of a licensee's product revenues for a patent license (the "patent license") and of 2.98 percent for a license giving access to the secret interoperability information (the "information license"). In a statement of objections of 1 March 2007, the Commission set out its concerns regarding Microsoft's unreasonable pricing. On May 21, 2007, Microsoft reduced its royalty rates to 0.7 percent for a patent license and 0.5 percent for an information license, as regards sales within the EEA, while leaving the worldwide rates unchanged.

Only as from October 22, 2007 did Microsoft provide a license giving access to the interoperability information for a flat fee of $14,888 (€10 000) and an optional worldwide patent license for a reduced royalty of 0.4 percent of licensees' product revenues.

Today's decision concludes that the royalties that Microsoft charged for the information license-i.e. access to the interoperability information-prior to October 22, 2007 were unreasonable. Microsoft therefore failed to comply with the March 2004 decision for three years, thereby continuing the behavior confirmed as illegal by the Court of First Instance. Today's decision concerns a period of non-compliance not covered by the penalty payment decision of 12 July 2006 starting on June 21, 2006 and ending on October 21, 2007. The decision does not cover the royalties for a distinct patent license.

The Commission has based its conclusions as to the unreasonableness of Microsoft's royalties prior to October 22, 2007 on the lack of innovation in a very large proportion of the unpatented interoperability information and a comparison with the pricing of similar interoperability technology.

For further information and background on this case see MEMO/08/125 and the Europa Web site: http://ec.europa.eu/comm/competition/antitrust/cases/microsoft/index.html.

 

Following is a list of frequently asked questions provided by the European Commission.

 

Q. Why has the Commission taken this decision after Microsoft has complied with the 2004 decision in October 2007?

A. Microsoft failed to comply with its obligation under the 2004 decision for nearly three years after its application for interim measures was rejected by the president of the Court of First Instance on December 22, 2004. During this period Microsoft was able to continue to reap the benefits of its illegal refusal to disclose interoperability information to the detriment of innovation and consumers.

Q. Is Microsoft now in full compliance with the 2004 decision?

A. In line with the 2004 decision, since October 22, 2007 Microsoft provides the interoperability information on reasonable and non-discriminatory terms. Microsoft recently posted the interoperability information on its Web site. The interoperability information made available by Microsoft also appears to be complete and accurate to an extent that a software development project can be based on it. Therefore, on the basis of the information currently at its disposal, the Commission considers that Microsoft is now, more than three years later, complying with its obligations under the 2004 decision. However, licensees may raise additional issues when they obtain access to the information and Microsoft must keep the interoperability information updated and fix errors on an ongoing basis.

Q. Why did the Commission consider Microsoft's royalty rates prior to 22 October 2007 unreasonable?

A. The Commission examined the interoperability information provided by Microsoft with the help of technical experts (and in particular the Monitoring Trustee, Mr. Barret, a UK computer specialist chosen by the Commission from a short list proposed by Microsoft). The Commission concluded that a very large part of the unpatented interoperability information lacked innovation. Furthermore, a comparison with the pricing of similar interoperability technology, including other technology made available by Microsoft itself, shows that royalties demanded by Microsoft for this kind of unpatented information prior to 22 October were unreasonable.

Q. Why is the imposed penalty payment higher than the fine imposed on Microsoft in the 2004 decision?

A. Fines and penalty payments are different in character. While fines sanction past infringements, penalty payments are intended to induce a speedy end to non-compliance with a previous Commission decision. A maximum daily amount is fixed in advance in order to create a sufficient deterrent from further non-compliance and the total potential liability is based on the application of this daily amount to the subsequent period of non-compliance.

The maximum amount for fines under Regulation 1/2003 is 10 percent of the yearly turnover of the concerned undertaking whilst the maximum amount for daily penalty payments is 5 percent of the average daily turnover per day.

Q. Why is the interoperability information so important?

A. As recently confirmed by the Court of First Instance in its Microsoft judgment the interoperability information, i.e. the interface information of how to "communicate" with Microsoft's PC and server operating systems that Microsoft refused to disclose to its competitors, is vital for them to viably compete in the market for work group server operating systems and to be able to bring innovative products to that market.

Q. Where does the money go?

A. The penalty payment is paid into the EU budget. It does not increase the budget, but reduces the contribution from member states and so from taxpayers.

The European Commission represents the general interest of the EU and is the driving force in proposing legislation (to Parliament and the Council), administering and implementing EU policies, enforcing EU law (jointly with the Court of Justice) and negotiating in the international arena.

BLOG COMMENTS POWERED BY DISQUS

LATEST COMMENTS

Support MC Press Online

$

Book Reviews

Resource Center

  • SB Profound WC 5536 Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application. You can find Part 1 here. In Part 2 of our free Node.js Webinar Series, Brian May teaches you the different tooling options available for writing code, debugging, and using Git for version control. Brian will briefly discuss the different tools available, and demonstrate his preferred setup for Node development on IBM i or any platform. Attend this webinar to learn:

  • SB Profound WP 5539More than ever, there is a demand for IT to deliver innovation. Your IBM i has been an essential part of your business operations for years. However, your organization may struggle to maintain the current system and implement new projects. The thousands of customers we've worked with and surveyed state that expectations regarding the digital footprint and vision of the company are not aligned with the current IT environment.

  • SB HelpSystems ROBOT Generic IBM announced the E1080 servers using the latest Power10 processor in September 2021. The most powerful processor from IBM to date, Power10 is designed to handle the demands of doing business in today’s high-tech atmosphere, including running cloud applications, supporting big data, and managing AI workloads. But what does Power10 mean for your data center? In this recorded webinar, IBMers Dan Sundt and Dylan Boday join IBM Power Champion Tom Huntington for a discussion on why Power10 technology is the right strategic investment if you run IBM i, AIX, or Linux. In this action-packed hour, Tom will share trends from the IBM i and AIX user communities while Dan and Dylan dive into the tech specs for key hardware, including:

  • Magic MarkTRY the one package that solves all your document design and printing challenges on all your platforms. Produce bar code labels, electronic forms, ad hoc reports, and RFID tags – without programming! MarkMagic is the only document design and print solution that combines report writing, WYSIWYG label and forms design, and conditional printing in one integrated product. Make sure your data survives when catastrophe hits. Request your trial now!  Request Now.

  • SB HelpSystems ROBOT GenericForms of ransomware has been around for over 30 years, and with more and more organizations suffering attacks each year, it continues to endure. What has made ransomware such a durable threat and what is the best way to combat it? In order to prevent ransomware, organizations must first understand how it works.

  • SB HelpSystems ROBOT GenericIT security is a top priority for businesses around the world, but most IBM i pros don’t know where to begin—and most cybersecurity experts don’t know IBM i. In this session, Robin Tatam explores the business impact of lax IBM i security, the top vulnerabilities putting IBM i at risk, and the steps you can take to protect your organization. If you’re looking to avoid unexpected downtime or corrupted data, you don’t want to miss this session.

  • SB HelpSystems ROBOT GenericCan you trust all of your users all of the time? A typical end user receives 16 malicious emails each month, but only 17 percent of these phishing campaigns are reported to IT. Once an attack is underway, most organizations won’t discover the breach until six months later. A staggering amount of damage can occur in that time. Despite these risks, 93 percent of organizations are leaving their IBM i systems vulnerable to cybercrime. In this on-demand webinar, IBM i security experts Robin Tatam and Sandi Moore will reveal:

  • FORTRA Disaster protection is vital to every business. Yet, it often consists of patched together procedures that are prone to error. From automatic backups to data encryption to media management, Robot automates the routine (yet often complex) tasks of iSeries backup and recovery, saving you time and money and making the process safer and more reliable. Automate your backups with the Robot Backup and Recovery Solution. Key features include:

  • FORTRAManaging messages on your IBM i can be more than a full-time job if you have to do it manually. Messages need a response and resources must be monitored—often over multiple systems and across platforms. How can you be sure you won’t miss important system events? Automate your message center with the Robot Message Management Solution. Key features include:

  • FORTRAThe thought of printing, distributing, and storing iSeries reports manually may reduce you to tears. Paper and labor costs associated with report generation can spiral out of control. Mountains of paper threaten to swamp your files. Robot automates report bursting, distribution, bundling, and archiving, and offers secure, selective online report viewing. Manage your reports with the Robot Report Management Solution. Key features include:

  • FORTRAFor over 30 years, Robot has been a leader in systems management for IBM i. With batch job creation and scheduling at its core, the Robot Job Scheduling Solution reduces the opportunity for human error and helps you maintain service levels, automating even the biggest, most complex runbooks. Manage your job schedule with the Robot Job Scheduling Solution. Key features include:

  • LANSA Business users want new applications now. Market and regulatory pressures require faster application updates and delivery into production. Your IBM i developers may be approaching retirement, and you see no sure way to fill their positions with experienced developers. In addition, you may be caught between maintaining your existing applications and the uncertainty of moving to something new.

  • LANSAWhen it comes to creating your business applications, there are hundreds of coding platforms and programming languages to choose from. These options range from very complex traditional programming languages to Low-Code platforms where sometimes no traditional coding experience is needed. Download our whitepaper, The Power of Writing Code in a Low-Code Solution, and:

  • LANSASupply Chain is becoming increasingly complex and unpredictable. From raw materials for manufacturing to food supply chains, the journey from source to production to delivery to consumers is marred with inefficiencies, manual processes, shortages, recalls, counterfeits, and scandals. In this webinar, we discuss how:

  • The MC Resource Centers bring you the widest selection of white papers, trial software, and on-demand webcasts for you to choose from. >> Review the list of White Papers, Trial Software or On-Demand Webcast at the MC Press Resource Center. >> Add the items to yru Cart and complet he checkout process and submit

  • Profound Logic Have you been wondering about Node.js? Our free Node.js Webinar Series takes you from total beginner to creating a fully-functional IBM i Node.js business application.

  • SB Profound WC 5536Join us for this hour-long webcast that will explore:

  • Fortra IT managers hoping to find new IBM i talent are discovering that the pool of experienced RPG programmers and operators or administrators with intimate knowledge of the operating system and the applications that run on it is small. This begs the question: How will you manage the platform that supports such a big part of your business? This guide offers strategies and software suggestions to help you plan IT staffing and resources and smooth the transition after your AS/400 talent retires. Read on to learn: