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Microsoft Hit With 280m Euro Fine 527

Posted by CmdrTaco
from the thats-a-lotta-bread dept.
Craig Mason writes "The BBC Reports that "Microsoft has been fined 280.5m euros ($357m; £194m) by the European Commission for failing to comply with an anti-competition ruling. The software giant was hit by the fine following a long-running dispute between the US firm and EU regulators. The move follows a landmark EU ruling in 2004, which ordered Microsoft to provide rivals with information about its Windows operating system. EU regulators also warned Microsoft it could face new fines of 3m euros a day.""
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Microsoft Hit With 280m Euro Fine

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  • 2 days (Score:3, Interesting)

    by Anonymous Coward on Wednesday July 12, 2006 @08:42AM (#15704438)
    Acording to wikipedia, it will take them 2 days to recover it. Big deal.
  • Worrying thought... (Score:5, Interesting)

    by tygerstripes (832644) on Wednesday July 12, 2006 @08:43AM (#15704449)
    What happens if they don't pay?
  • wow (Score:4, Interesting)

    by joe 155 (937621) on Wednesday July 12, 2006 @08:44AM (#15704456) Journal
    what a small slap on the wrist which is small even by the standards that the EU set themselves, typical, the fine should have been over 1.8 bn euros if they'd done what they said (about 3m euros a day backdated to 2004)... why so small?
  • From the BBC site: (Score:5, Interesting)

    by A beautiful mind (821714) on Wednesday July 12, 2006 @08:45AM (#15704463)
    FROM OTHER NEWS SITES
    Telegraph EU fines Microsoft ,280.5m - 30 mins ago
    Guardian Unlimited EU hits Microsoft with 280.5m antitrust fine - 34 mins ago
    MSNBC Microsoft calls EU fine unjust - 37 mins ago
    vnunet.com EC slaps 280m fine on Microsoft - 38 mins ago
    The Register Commission beats Microsoft with ,280m stick - 41 mins ago
    You can almost believe in bias free journalism, can you? :)
  • Re:WOW! but.... (Score:3, Interesting)

    by ThePilgrim (456341) on Wednesday July 12, 2006 @08:45AM (#15704464) Homepage
    True but the EU has allready started to ratchet up the fine.

    If MS arn't in complience by the end of the month then the fine goes up another .5M euros.

    The EU can start bumping up the fine as high as it wants now it has aggrement with the member states.
  • Re:WOW! but.... (Score:5, Interesting)

    by oh_my_080980980 (773867) on Wednesday July 12, 2006 @08:46AM (#15704466)
    I think the important point here is that the EU fined Microsoft and did not cave to pressure from the United States and interested third parties. There's no appealing this one. God bless the EU!

    Now the question is will Microsoft comply?

  • by CurtMonash (986884) on Wednesday July 12, 2006 @08:46AM (#15704467) Homepage
    Like, "our documentation wasn't good enough", or "those commissioners are too dumb to understand we don't deserve to be punished?"

    The real problem, of course, is that Windows is such a huge hairball -- as Scott McNealy so aptly put it -- that they don't really know how to unbundle. Complying with the law is just as late as everything else is.

    But before we all bash them too too hard -- where, again, are the usable Linux desktops that we'd like to have to replace Windows???
  • by bobbo69 (905401) on Wednesday July 12, 2006 @08:49AM (#15704482)
    From the FT: 'Under European Union competition rules companies that fail to comply with a Commission ruling can be fined up to 5 per cent of their daily worldwide turnover.

    In Microsoft's case this would be about $5.5m-a-day.'

    http://www.ft.com/cms/s/c55bc756-1047-11db-8f6f-00 00779e2340.html [ft.com]

    I would imagine that there would be stiffer penalties (i.e., non-financial aimed at curtailing MSFT's ability to trade in the EU) available if MSFT continued to defy the commission. If there were not this would be a de facto admission that companies can break the law in the EU with impunity if they are rich enough. I very much doubt the commission would tolerate that state of affairs.

  • Re:Easy (Score:5, Interesting)

    by tygerstripes (832644) on Wednesday July 12, 2006 @08:52AM (#15704503)
    This is my point. What would be the consequences of such inaction? Basically, the EU is seen to be powerless against mega-corporations. The law is subject to corporations, not the other way around. M$ would be perceived as above the law in the EU! Big, big trouble...

    The only way the EU could actually enforce this would be to threaten, essentially, trade sanctions. But how heavily is the government, industrial and home market of every EU country saturated with M$ products? So they can't even impose anything worth a damn without incurring massively detrimental consequences themselves.

    Think this through, seriously. It's frightening.
  • by Opportunist (166417) on Wednesday July 12, 2006 @08:56AM (#15704529)
    EU: MS, you're fined 1.5 M a day.
    MS: Ok.

    (pause a year)

    EU: MS, you didn't pay, you're fined 2.5m a day.
    MS: Ok.

    (pause a year)

    EU: MS, you still didn't pay, you're fined 3.5m a day.
    MS: ok.

    Is it me or ... I mean, hell, if I didn't pay a speeding ticket I'd be in jail before this year is over, not next or some decade. What's a fine good for if the one fined doesn't bother paying?
  • Re:Easy (Score:3, Interesting)

    by mrchaotica (681592) * on Wednesday July 12, 2006 @09:05AM (#15704596)
    But how heavily is the government, industrial and home market of every EU country saturated with M$ products? So they can't even impose anything worth a damn without incurring massively detrimental consequences themselves.
    You know, the only thing that allows Microsoft to sell software in the EU to begin with is the fact that the EU enforces their copyright for them. The easiest thing would be for the EU to declare that all of Microsoft's products are Public Domain -- then they can keep using it all they want while incurring massive benefits (no more need to buy licenses! Woohoo!) instead.
  • Re:Double Standard (Score:5, Interesting)

    by mccalli (323026) on Wednesday July 12, 2006 @09:10AM (#15704625) Homepage
    Am I the only one who finds it the least bit ironic that while the EU fines MS for bundling application, Apple is bashing MS with comericals bragging about how it bundles MORE software? I guess having no marketshare gives you the right to extra competative advantage?

    Yes, I noticed that. However, the comparison is actually "Mac vs PC", not "Mac vs Microsoft". I can't buy a PC from Microsoft, I can buy a PC from Dell. Or HP. Or Fred down the road if I give him the cash to build one.

    Dell, HP and Fred-down-the-road can bundle whatever applications they like. Years ago a lot of budget places used to bundle Lotus Smartsuite to keep their prices down vs bundling Office. So the comparison is valid. And yes, having no marketshare does rather free you from monopolist rules because, pretty much by definition, you're not a monopolist.

    Cheers,
    Ian

  • Re:Easy (Score:3, Interesting)

    by KokorHekkus (986906) on Wednesday July 12, 2006 @09:19AM (#15704677)
    Even simpler, they'll just go after the Microsoft EMEA board of directors. Microsoft EMEA is the corporate entity responsible for business in Europe, Middle East and Africa (hence EMEA) and they have their offices in Ireland.
  • by Anonymous Coward on Wednesday July 12, 2006 @09:25AM (#15704719)
    One of the judges, acting as prosecutor, had read the charges.
    "You may now offer whatever plea you wish to make in your own defence," he announced. Facing the platform, his voice inflectionless and peculiarly clear, Bill Gates answered:
    "I have no defence."
    "Do you --" The judge stumbled; he had not expected it to be that easy. "Do you throw yourself upon the mercy of this court?"
    "I do not recognise this court's right to try me."
    "What?"
    "I do not recognise this court's right to try me."
    "But, Mr. Gates, this is the legally appointed court to try this particular category of crime."
    "I do not recognise my action as a crime."
    "But you have admitted that you have broken our regulations controlling the sale of your software."
    "I do not recognise your right to control the sale of my software."
    "Is it necessary for me to point out that your recognition was not required?"
    "No. I am fully aware of it and I am acting accordingly."
    "Do you mean that you are refusing to obey the law?" asked the judge.
    "No. I am complying with the law - to the letter. Your law holds that my life, my work and my property may be disposed of without my consent. Very well, you may now dispose of me without my participation in the matter. I will not play the part of defending myself, where no defence is possible, and I will not simulate the illusion of dealing with a tribunal of justice."
    "But, Mr. Gates, the law provides specifically that you are to be given an opportunity to present your side of the case and to defend yourself."
    "A prisoner brought to trial can defend himself only if there is an objective principle of justice recognised by his judges, a principle upholding his rights, which they may not violate and which he can invoke. The law, by which you are trying me, holds that there are no principles, that I have no rights and that you may do with me whatever you please. Very well. Do it." "Mr. Gates, the law which you are denouncing is based on the highest principle - the principle of the public good. Who is the public? What does it hold as its good? There was a time when men believed that 'the good' was a concept to be defined by a code of moral values and that no man had the right to seek his good through the violation of the rights of another. If it is now believed that my fellow men may sacrifice me in any manner they please for the sake of whatever they deem to e their own good, if they believe that they may seize my property simply because they need it - well, so does any burglar. There is only this difference: the burglar does not ask me to sanction his act."
    "Are we to understand," asked the judge, "that you hold your own interests above the interests of the public?"
    "I hold that such a question can never arise except in a society of cannibals."
    "What ... do you mean?"
    "I hold that there is no clash of interests among men who do not demand the unearned and do not practice human sacrifices."
    "Are we to understand that if the public deems it necessary to curtail your profits, you do not recognise its right to do so?"
    "Why, yes, I do. The public may curtail my profits any time it wishes - by refusing to buy my product."
    "We are speaking of ... other methods."
    "Any other method of curtailing profits is the method of looters - and I recognise it as such."
    "Mr. Gates, this is hardly the way to defend yourself."
    "I said that I would not defend myself."
    "But this is unheard of! Do you realise the gravity of the charge against you?"
    "I do not care to consider it."
    "Do you realise the possible consequences of your stand?"
    "Fully."
    "It is the opinion of this court that the facts presented by the prosecution seem to warrant no leniency. The penalty which this court has the power to impose on you is extremely severe."
    "Go ahead."
    "I beg your pardon?"
    "Impose it."
    The three judges looked at one another. Then their spokesman turned back to Gates. "This is unprecedented," he said.
    "It is completely irregular,
  • Re:No, they couldn't (Score:3, Interesting)

    by mrchaotica (681592) * on Wednesday July 12, 2006 @09:56AM (#15704923)
    Considering that canceling the copyright would require making an exception to the law to begin with, making an exception to the treaty also isn't that huge of a difference.
  • Re:Easy (Score:5, Interesting)

    by schon (31600) on Wednesday July 12, 2006 @10:04AM (#15704978)
    They can't really declare it freeware.

    Of course they can. Assign a value of $X to the copyright of a single product, then the EU just assumes the copyright for it in lieu of the debt, and releases it at no charge. Seizure of assets happens all the time with real property - why is it so hard to think that it could happen with virtual property?

    What happens when Microsoft did comply, how can you just take that back.

    If MS paid the fine, do you think that the EU will be giving the money back if/when they comply?

    It's a punishment, they're not supposed to get it back.
  • Jolly good show! (Score:2, Interesting)

    by Toreo asesino (951231) on Wednesday July 12, 2006 @10:07AM (#15705006) Journal
    The funny thing is, the US has unoffically admitted that the EU stance is actually quite a good one - http://news.zdnet.co.uk/business/legal/0,3...39278 431,00.htm [zdnet.co.uk]

    This procedure will benefit everyone; more-opennes == more competition == greater choice for consumers.
  • Re:No, they couldn't (Score:3, Interesting)

    by ThePhilips (752041) on Wednesday July 12, 2006 @10:09AM (#15705022) Homepage Journal
    Under WIPO treaties ... EU can do no such thing.

    All the WIPO/WTO (global treaties of that kind) have provisions for emergencies and strategical resources. (*) M$Windows is installed on 95% of computers in Europe => M$Windows is strategical resource. M$ pulls out of Europe => that would be emergency. EU/EC already has all the evidence against M$ - they'd make up case in WTO very quickly.

    But, of course, M$ will not pull out of Europe. 28%(?) of M$ revenue comes from here. Such stunts on M$ behalf might easily bring down the whole company. Even without EC intervention. (*) No independent country would ever put itself into complete dependence on treaty with another country. (The independence clause of respective constitutions is still there I hope.) Also, WIPO (part of UN) is not much relevant here. The international trade case could be only brought up in WTO anyway.

  • Re:WOW! but.... (Score:4, Interesting)

    by Red Flayer (890720) on Wednesday July 12, 2006 @10:13AM (#15705052) Journal
    FYI, I'm an accountant.

    Whether or not MSFT can pay the fine out of cash is moot (though they can), my point was that the significance of the fine is better explained in terms of the income statement than their market cap.

    As to your example of a growing company continually operating at a loss in order to self-finance growth capital... being cash positive is important (crucial even). But this business model is fatally flawed... the question is not if that company will go bust, it is when. It's like a Ponzi scheme -- you're dependent on growth to meet your cash requirements. 'Engineering a soft landing' -- do you mean changing allocation of cash from growth investment to paying down debt?
  • by amightywind (691887) on Wednesday July 12, 2006 @10:17AM (#15705091) Journal
    MSFT has a market cap of 230-something billion. Substantial? Not really.

    The EU has telegraphed this fine for a year. It could have easily been avoided. Gates and Ballmer may have a large cash hoard. I doubt if their stockholders appreciate them lighting it on fire.

  • by WhiteWolf666 (145211) <sherwin@nosPam.amiran.us> on Wednesday July 12, 2006 @10:35AM (#15705250) Homepage Journal
    Simple. The EC declares Microsoft in contempt, leevies a larger fine. Files a complaint with the WTO, files a complaint with the U.S. FTC and SEC. The fine continues to accrue interest.

    Microsoft still doesn't pay. The WTO complaint fails. FTC/SEC blow off the EC.

    Fine grows larger. EC confiscates Microsoft Europe's assets. Most likely, some nations (like perhaps China/Russia) confiscate some Microsoft assets as well, paying a portion to the EC.

    Microsoft still doesn't pay.

    EC prohibits Microsoft from doing business in Europe. EC strips Microsoft's European copyright, permitting free distribution of MS products. As you may or may not know, ISPs in Europe are closed related to the government. What would happen next would be nothing other than a full-off declaration of War on Microsoft by the EU, with ISPs blackholing WindowsUpdate in favor of a EuropeanUpdate site (with WGA removed), massive investment of capital by the EU into developing alternative systems, and million upons millions of Linux and/or OS X systems brought online within a year, all bearing the EU's seal of approval.

    Don't believe me? Europe's already done something similar with GSM [wikipedia.org]. While that wasn't quite as antagonistic, Europe isn't afraid to build its own analog, at considerable expense (see the Galileo global satellite system). The EU will protect it self, economically, and in terms of security. They'll "steal" Windows if need be, and Europe will happily develop its own OS, most likely, in my estimation, a heavily sponsored version of Linux (SuSE or Mandriva).
  • by wfberg (24378) on Wednesday July 12, 2006 @11:16AM (#15705592)
    First,
    But, to say that Microsoft's market capitalization is not affected by this ruling is naive at best, and outright wrong at worst.
    that's not what the grandparentposter said. He said that market cap is not a good indicator of how impactful a fine is. For example, it might affect existing credits adversely, increasing the cost of existing lines of credit as their credit rating drops. That's an effect unrelated to market cap, and related more to things like the actual assets and cashflow.

    Anything and everything can and will influence the stock quotes themselves, and influence market cap, including whether the weather is nice or not, if some trader is having a good day, etc.

    For a lot of companies market capitalization says next to nothing. Think about companies that float 20% of their stock, with 80% remaining in private hands. The public will never hold a controlling interest, some one looking to take over the company will never buy up open market shares; the stock's price simply doesn't influence the fundamentals much, let alone the actual price paid for company ownership.

    What about arbitrage? Basically, if a stock goes into freefall for no apparent reason other than a change in supply/demand for stock trades, then the value of their shares would be lower/higher than the value of the company. This is a classic case of arbitrage, and will eventually lead to an arbiteur to buy (if it is undervalued) or short (if it is overvalued) the stock. If the company is significantly undervalued, an arbiteur might decide to purchase a significant portion of the outstanding shares and attempt to divide the company into pieces & sell it off. This is what a corporate raider does.
    Now we're headed in "invisible hand of the market" territory; which isn't as flawless as you suggest.

    I'll give an example where this simply won't work. Consider the largest owner of commercial real estate (shops) in, say, The Netherlands (Maxeda). Maxeda's assets, its real estate, are worth more combined than its marketcap! Madness, you'd say! The invisible hand of the market should correct this outrage! Either Maxeda is worth more, or a corporate raider should split the company up and sell it in parts.

    The problem is, that as soon as you try to liquidate ALL of Maxeda's assets, you're looking for one (or a handful) of companies that need its real estate, and that want to operate shops on there. The problem of course is, that such parties cannot be found. In fact, if you could find a company that would buy all the real estate, they would then have to open up shops in them. Then you're left with a company with the exact same real estate with more or less the same shops in them. How likely are they to do better than Maxeda itself? Given the cost of selling their real estate; not. Corporate raiding cannot save Maxeda.

    Of course the point here is that the real estate is probably valued fairly; but only if you expect to sell those shops one at a time. If you look at the valuation of your own home, you might find reference to an amount of time the valuer would expect your house to be for sale, before it sells at its valuation price.

    The same goes for market cap, as the grandparentposter eloquently explained; if you suddenly dump every share on the market, you won't get a good price for them - and it's doubtful the price would recover. Conversely, if you try to do a hostile takeover of a company, expect to pay a premium over the market value, like Mittal recently did to acquire Arcelor. There was no magic arbitrage going on there that made sure Mittal paid the right price; in fact, they probably paid too much, but they expect to make good on that by using their controlling interest to do new and exciting things. And that is merely a gamble.

    (Another example; airliners. Airlines have HUGE amounts in assets. A corporate raider should surely split them up and sell the assets. But those assets are airplanes. And the only way to make money from airplanes is to operate.. an airline! To non-airline companies those assets are worth exactly $0 of their money. Good luck raiding them.)
  • by Anonymous Brave Guy (457657) on Wednesday July 12, 2006 @11:43AM (#15705805)

    The EU has a population of approximately 450 million, while the US is around 300 million. The GDP, on a PPP basis, is approximately the same for both.

    However, there is a wide gap between the top and bottom nations in the EU, particularly since the recent expansion. Looking at GDP per capita [cia.gov], the US is hardly exceptional on the world stage. It's not at the top of the list, and within about 75% you have most of central Europe and Scandinavia, Canada, Australia, and Japan, as well as several much smaller countries.

    Personally, I can live with our modestly lower level of productivity (on that metric, at least - the reliance on PPP in a market which isn't 100% efficient is not a perfect model) in exchange for our much higher quality of life (most of those nations work shorter hours, take more vacation time, live longer, etc.) and not conceding inappropriate levels of power and influence to The Mighty Corporation. YMMV, of course.

  • by dada21 (163177) * <adam.dada@gmail.com> on Wednesday July 12, 2006 @11:46AM (#15705828) Homepage Journal
    Thank you for agreeing that trade secrets are bad for competition. True, copyright, licencing and certainly patents prevent competition. Which is why the anti-monopoly laws curb their power when they outlive their purpose. But complete deregulation, as you seem to advocate it, is not the solution, it's complete madness. If you take away copyright, you take away any incentive anyone might have to publish. If you take away patents and licencing in general you take away any incentive to innovate. Government is not evil, it's a huge protection and a necessary burden.

    I disagree with you. I've written two books (both becoming free e-books) that I never used copyright to protect my creations. I sold them, and I continue to reap profits from their sale. I maintain about a dozen blogs and websites where I repudiate copyright and allow others to take my words intact and use them as their own. As long as the ideas get out there, my income goes up even if no one knows that I wrote the words. I also use my freely distributed words to reinforce my hourly rate, which goes up each and every year well over inflation's rise.

    The blogosphere and F/OSS movement both contradict the idea that people will only create if their works are protected. The garage band and pub band industry also rejects the claim. MOST artists care less about protecting their art as long as they are making an income. No record label would take another artist's works and distribute it as their own -- the label would jeopardize their future if they attempted to defraud the public. The Internet protects the original author's ego more than any other distribution scheme in the past.

    What gave MS its edge vs. Digital was the deal with PC makers to buy MSDOS for all their PC's, whether they installed it or not. So if a customer wanted DRDOS he had to pay for MSDOS as well.

    So? When I sell my labors, I tell my customers that if they want a discount, they better buy what I recommend. If they don't, my rate doubles. Some customers prefer to go direct, so I charge them a higher rate. Microsoft has EVERY right to contract their stipulations -- PC makers had every right to refuse the contract and sell hardware with opposing operating systems. The consumers decided they wanted Microsoft, not DR-DOS. On top of that, the State's enabling of copyright and patents prevented DR-DOS from legally reverse engineering the MS code to sell a competing product. The State restrained trade, not Microsoft.

    Deregulation is what gave California its power outages and England it's shortage of tap water.

    Lies. Myth. Completely false. Deregulation NEVER happened in California. In both cases, wholesale costs were partially deregulated, but retail costs were not -- and competition was NEVER allowed into the picture. See this article: The Myth of De-Regulation [mises.org] and this article: The Failure of State-Designed Markets [mises.org] In BOTH cases, government is to blame 100%. Why did only California experience these outages when other states are even more free in energy policy? Corrupt politicians and corrupt public policy.

    What you need is not deregulation, it's BALANCED regulation. Protect innovation, production, implementation, commerce, etc. until the players become too rapacious and the disadvantages outweigh the benefits. Which why patents have a limited lifespan, btw.

    No patent really seems to work, though. Look at cell phones -- almost all of them are nearly identical in how they work, but every phone has a dozen patents pending. None of the patents mean anything to the cartelized players in the game -- they only serve to restrict new players from competing. We'd have a cheaper and higher quality world without patents.

    This had nothing to do with the state, it was the deal with the hardware manufacturer(s) (and the fact that the hardware manufacturer had to honour their contract -- are y
  • by chthon (580889) on Wednesday July 12, 2006 @12:11PM (#15706012) Homepage Journal

    I think the real sting is that, probably, in whole Europe, on the news (radio, TV), you could hear Neelie Kroes say that "Nobody is above the law" in regard to the way Microsoft behaved.

  • Re:No, they couldn't (Score:3, Interesting)

    by 99BottlesOfBeerInMyF (813746) on Wednesday July 12, 2006 @02:06PM (#15706840)

    I'd be interested to see some examples.

    Try bankruptcies and fraud cases for starters. Intellectual property is seized and transferred from corporate entities all the time. Patents and copyrights have been transferred any number of times and are considered the same as any other asset as far as the criminal courts are concerned.

    I've never seen anything in either the UK's IP legislation or anything like the EU Copyright Directive...

    Those uphold the principles of reciprocity, not the right of the government to act within it. If the EU confiscated the intellectual property the US is the one bound to honor it. I think you're either misconstruing my earlier remark. In any case any given member state may have laws that conflict, but if so I've never seen one. It seems like a huge loophole if I can transfer all my assets to intellectual property (like patents and copyrights) and the government is powerless to seize any of them even if they are purchased with the proceeds of a crime. If this is truly the case, I might have a new business venture in mind. Let me know if you find any countries where this truly is the case.

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