European Commission Fines Microsoft Record £680m

The EU today imposed a record €899m (£680m) fine on Microsoft for charging "unreasonable" prices to rivals for access to its dominant software.

The fine, the largest imposed on a single company, brings the total levied on the world's leading software group close to €1.7bn in the past four years.

Neelie Kroes, EU competition commissioner, who said she had no pleasure in imposing the fine, told journalists she could have charged Microsoft €1.5bn in the latest penalty.

The fine, representing 60% of the maximum, reflects the 488 days – until October 22 2007 - in which Microsoft refused to comply with the commission's March 2004 anti-trust ruling.

Denying vindictiveness, she insisted the new penalty was "reasonable and proportionate" and should be "a clear signal to the outside world and especially Microsoft that they should stick to the rules".

"Microsoft is the first company in 50 years of EU competition policy that the commission has had to fine for failure to comply with an anti-trust decision," she said. "I hope that today's decision closes a dark chapter in Microsoft's record of non-compliance."

The company's immediate reaction was to suggest that the latest fine was about past issues that had been resolved and point to new working practices to make its products more open, especially last week's deal on inter-operability with the "open source" community of software developers.

But Kroes, reiterating that she was investigating two further complaints against the group regarding inter-operability, warned that she could impose further penalties unless the company underwent a genuine change in behavior. A press release, she said, did not necessarily indicate a change in business practice.

"I'm not naive," she said. "I'm not in the mood when someone is talking about inter-operability to accept this as change. First show me. Talk is cheap; flouting the rules is expensive so let's wait and find the reality in this context. If you flout the rules you will be caught and it will cost you dear."

Microsoft initially set a royalty fee of 3.87% of a licensee's product revenues for a patent license, giving a rival access to secret protocols behind its Windows operating system, and only reduced this to a flat €10,000 after two further offers.

Kroes pointed out that, during the protracted negotiations with Microsoft over compliance in the past few years, it had four times promised to change its behavior. "Hopefully, it will be at the fifth time but they have to deliver," she said.

The EU fined Microsoft an initial €497m, then a record, in March 2004 and added on €280.5m in July 2006 for non-compliance with its ruling.

Kroes accused Microsoft of continuing to abuse its powerful market position, stifling innovation and damaging consumers. "Directly and indirectly, this had negative effects on millions of offices in companies and governments around the world."