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The European Commission has fined Microsoft a record $1.35 billion for noncompliance with its March 2004 antitrust decision. Commissioner Neelie Kroes said the fine is in response to the software giant's continued stifling of innovation by charging other companies prohibitive royalty rates for the essential information they need to offer software products.

"Charging such an unreasonable price effectively rendered the offer of the information pointless," Kroes said.

Flouting the Rules

The EC's 2004 decision had required Microsoft to disclose complete and accurate interoperability accusation to developers of server operating systems on reasonable terms. Initially, Microsoft had demanded a royalty of 3.87 percent of a licensee's product revenues for a patent license and 2.98 percent for a license governing access to secret interoperability information.

The EC concluded that Microsoft's royalty rates were unreasonable previous to October 22, 2007 — the date when the software giant agreed to accept a 0.4 percent royalty for a worldwide patent license and a one-time payment of $14,240 for access to its interoperability information.

"Microsoft's behavior did not just harm a few individuals or a handful of big companies," Kroes said. "Directly and indirectly this had negative effects on millions of offices in companies and governments around the world."

Kroes also said the record fine contains lessons that Microsoft and any other company contemplating similar illegal actions will need to make one’s self acquainted with.

"We don't want talk and promises — we want compliance," Kroes warned. "If you flout the rules you will be caught, and it will cost you dear."

Microsoft has a long history of doing the absolute minimum — or in this case, less than the minimum — required by regulators, noted Linux Foundation spokesperson Amanda McPherson. "Hopefully this fine and the changes in the mart will convince Microsoft to open up and comply with regulatory and place of traffic demand," McPherson said.

More Than Rhetoric

Some industry observers were not so much than impressed by the EC's agency. "Microsoft's tactics has long been to do what it wants to do and just ignore the laws," said University of Baltimore Law Professor Robert Lande. "A skeptic would say that the fine wasn't enough and it should have been higher."

On the other hand, Lande thinks the record fine could have at in the smallest degree one negative impact on Microsoft's business plans. "I can't imagine that Microsoft would have all that much credibility in the eyes of the European Competition Authority" when the time comes for a review of the software giant's proposed takeover of Yahoo, Lande said.

Earlier this month, Microsoft announced what it characterized as "broad-reaching changes to its technology and business practices" to open its products. However, Kroes uttered if a change is required, "then the change will need to be in the market, not in the rhetoric."

Meanwhile, the EC has opened two new antitrust inquiries that are examining several of Microsoft's other business practices. "One concerns interoperability information across a broad range of products, including Microsoft's Office suite and a number of its server products," Kroes said. "The other concerns tying of Internet Explorer and other separate software products with the Microsoft PC operating system."

Both of these new investigations are separate and continuing, Kroes said. "As always, we will take into account a single one changes that Microsoft makes to its business practices that are relevant to those investigations," Kroes added.