Microsoft Fined 899 Million Euro

The European Commission has imposed a penalty payment of 899 million euros on Microsoft for non-compliance with its obligations under the Commission’s March 2004 Decision. Today’s Decision finds that, prior to October 22, 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.

“Microsoft was the first company in fifty 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% of a licensee’s product revenues for a patent license (the “patent license”) and of 2.98% for a license giving access to the secret interoperability information (the “information license”). In a statement of objections of March 1, 2007, the Commission set out its concerns regarding Microsoft’s unreasonable pricing. On May 21, 2007, Microsoft reduced its royalty rates to 0.7% for a patent license and 0.5% for an information license, as regards sales within the European Economic Area, 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 10,000 euros and an optional worldwide patent license for a reduced royalty of 0.4% 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 July 12, 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.