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News Releases
No. 57/06
July 12, 2006
EUROPEAN COMMISSION IMPOSES €280.5 MILLION FINE ON MICROSOFT
The European Commission has imposed a penalty payment of
€280.5 million on
Microsoft for its failure to comply
with obligations under the Commission’s March 2004
Decision. That Decision found that Microsoft had abused
its dominant position under EU antitrust rules (Article
82 EC treaty), and required Microsoft to disclose
complete and accurate interface documentation which
would allow non-Microsoft work group servers to achieve
full interoperability with Windows PCs and servers.
Today’s decision finds that Microsoft has not fulfilled
this obligation. Should Microsoft continue to fail to
comply, the amount of the daily penalty payment to which
Microsoft could be subject, would rise to a maximum €3
million per day.
 “The Commission is obliged to ensure compliance with EU
law, and I have always underlined my determination to
ensure that Microsoft fully implements the Commission’s
March 2004 Decision,” said European
Competition
(Antitrust) Commissioner
Neelie Kroes.
“I regret that,
more than two years after the Decision, and despite an
Order from the President of the
Court of First Instance
that the Microsoft appeal to the Court does not suspend
Microsoft’s obligation to comply, 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. No company is above the law.
Any businesses operating in the EU must obey EU law., I
sincerely hope that the latest technical documentation
being delivered by Microsoft will finally bring them
into compliance and that further penalty payments will
not prove necessary.”
The Commission’s Decision of March 2004 requires
Microsoft to disclose complete and accurate
interoperability information to developers of work group
server operating systems. Following the rejection of
Microsoft’s application for suspension of this
requirement by the President of the Court of First
Instance in December 2004, the Commission expressed
concerns to Microsoft that the interoperability
information it had provided was not complete and
accurate. On November 10 2005, the Commission warned
Microsoft that were it not to comply with its obligation
as from December 15 2005 to: (1) supply complete and
accurate interoperability information; and (2) make that
information available on reasonable terms, it would face
daily penalty payments of up to €2 million per day for
continued non-compliance.
Today’s Decision concludes that, as of June 20 2006,
Microsoft had still not supplied complete and accurate
interoperability information as required by the March
2004 Decision. Microsoft’s obligations in this regard
are clearly outlined in that decision, both in terms of
the result to be achieved, and in terms of what
Microsoft must do to achieve that result. These
obligations were specific and have not changed: it is
for Microsoft to produce usable documentation.
The Commission has based its conclusion on the advice
of: (i) the Monitoring Trustee, who gives technical
assistance to the Commission as regards Microsoft’s
compliance with the Decision and (ii) the Commission’s
external technical advisors, TAEUS. From the outset of
the procedure, Microsoft has had full access to all the
reports on which the Commission’s conclusions are based.
Of the two elements of non-compliance identified on
November 10 2005, the provision of complete and accurate
interoperability information is a prerequisite for
interoperable work group server operating systems to be
developed. Microsoft’s non-compliance in this regard has
eliminated the effectiveness of the remedy.
Consequently, the Commission has taken the view that
Microsoft’s failure to comply in this respect should
constitute a larger part of the daily penalty payment of
€2 million. Today’s decision therefore imposes a daily
penalty payment of €1.5 million for this element of
non-compliance.
Today’s Decision also includes a provision pursuant to
Article 24(1) of
Regulation 1/2003, specifying that if
Microsoft fails to comply either with its obligation to
provide complete and accurate interoperability
information or to make that information available on
reasonable terms, the level of daily penalty payment to
which it would be potentially liable would rise to €3
million as of 31 July 2006. The imposition of a further
penalty payment for non-compliance would require a new
Commission decision.
For further information, including a statement by
Commissioner Kroes and prior press releases:
http://www.eurunion.org/newsweb/HotTopics/Microsoft.htm
.
Background:
Frequently Asked Questions:
What is Microsoft required to do?
The European Commission’s Decision of March 2004
required that Microsoft take various steps to put an end
to its illegal and anti-competitive conduct. These
included obligations to:
(1) Supply complete and accurate interface information
which would allow non-Microsoft work group servers to
achieve full interoperability with Windows PCs and
servers; and
(2) Make that information available on reasonable terms.
On 10 November 2005, the Commission warned Microsoft,
pursuant to Article 24(1) of Regulation 1/2003, that
should Microsoft not comply with these obligations by 15
December 2005, it would face a daily penalty payment of
up to €2 million. Article 24 of Regulation 1/2003
entitles the Commission to impose such penalty payments
not exceeding 5% of average daily turnover in the
preceding business year per calendar day to compel
companies to put an end to infringements of EC Treaty
anti-trust rules, where an infringement has been
established by a previous Commission anti-trust
decision.
Why has the Commission levied a penalty payment for
non-compliance on only the failure to provide
interoperability information, and not the terms on which
that information is provided (i.e. the first and not the
second of the two points from the 10th November 2005
Article 24(1) Decision)?
As regards the provision of information on reasonable
terms, Microsoft has announced that it will review the
pricing of its protocols once revised technical
documentation has been submitted. Furthermore, a final
assessment on the degree of innovation, if any, that is
contained in the interoperability information, and hence
the reasonableness of the royalties that Microsoft
charges, can only be made once the technical
documentation embodying that interoperability
information is complete and accurate.
Why has the Commission decided that the fine levied
should be €1.5 million per day?
Of the two elements of non-compliance identified in the
Article 24(1) Decision, complete and accurate
interoperability information is a prerequisite for
interoperable work group server operating systems to be
developed. Microsoft’s non-compliance in this regard has
eliminated the effectiveness of the remedy.
Consequently, the Commission has taken the view that
failure to comply in this respect should at this stage
constitute a larger part of the daily penalty payment
identified in the Article 24(1) Decision of 10 November
2005.
Why has the Commission taken today’s Decision given
that Microsoft is in the process of preparing revised
technical documentation?
Microsoft’s obligation was to comply with the March 2004
decision’s requirement to make available the relevant
technical documentation as of June 2004. As of 20th June
2006, Microsoft had not done that, and the Commission
decided that it was appropriate to levy a fine on
Microsoft for its non-compliance so far.
More than two years after the 2004 Decision, the
Commission has therefore been obliged to resort to
formal measures to ensure compliance. If any revised
documentation that Microsoft submits proved to be
complete and accurate, then Microsoft would not be
subject to further daily penalty payments from the date
on which complete and accurate technical documentation
was provided. This would be the best outcome. However,
if Microsoft continued to fail to comply with the
requirements of the March 2004 decision, then further
penalties could not be ruled out.
The overall penalty payment for just over half a year of
non-compliance is €280.5 million, whereas the March 2004
Decision’s fine for an abuse lasting more than five
years totalled €497 million. What is the explanation for
this?
The March 2004 Decision imposed a fine on Microsoft for
a past abuse of its dominant position. The present
penalty payment relates to Microsoft’s ongoing
non-compliance with a formal obligation set out in a
Commission Decision, and is hence of a qualitatively
different nature. Despite the Commission’s repeated
calls for compliance, Microsoft has failed to do so.
Microsoft’s continuing failure to bring its abuse of a
dominant position to an end is liable to increase
further the risk of elimination of effective competition
in the work group server operating system market.
Where does the money go?
The penalty payment is paid into the EU Budget. It does
not increase the Budget, but reduces the contribution
from Member States. The fines therefore reduce the
overall tax burden on individuals.
Why has the Commission increased the level of daily
penalty payment to which Microsoft would be subject in
the event of its continued non-compliance?
The Commission has taken this step because of
Microsoft’s continued non-compliance. More than 8 months
after the Article 24(1) Decision warned of daily penalty
payments, Microsoft has still not complied with its
obligations.
Has the Commission been in contact with the US
authorities?
The Commission is in regular contact with the US
authorities on these issues.
Further Contact Information
Press and Public Diplomacy
Delegation of the European Commission
2300 M Street, NW
Washington, DC 20037
http://www.eurunion.org/PressRoom
Tel: 202-862-9552
Fax: 202-429-1766
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