EU Slaps Record Fine on Microsoft

[Dreamer128]

By David Lawsky
BRUSSELS (Reuters) - U.S. software giant Microsoft was on Wednesday slapped with a record $611.8 million fine for violating European Union antitrust law and ordered to take immediate steps to stop crushing software rivals.

The EU executive said Microsoft must act within four months to change the way it does business in Europe "because the illegal behavior is still going on."

In addition to the fine, the European Commission, the enforcer of EU competition law, ordered the unbundling of Windows Media Player within 90 days and required that "complete and accurate" information be given to rival makers of computer servers within 120 days.

The commission characterized Windows, which runs on more than 95 percent of all personal computers, as a "near monopoly."

Microsoft spokesman Tom Brookes replied: "We believe the proposed settlement would have been better for European consumers." Settlement talks ended last week.

Competition Commissioner Mario Monti said in a statement, "Today's decision restores the conditions for fair competition in the market concerned and establishes clear principles for the future conduct of a company with such a strong dominant position."

The commission will appoint a special monitoring trustee to ensure that Microsoft's disclosures to rivals are "complete and accurate and that the two versions of Windows are equivalent in terms of performance."

The commission said its remedy "does not mean that consumers will obtain PCs and operating systems without media players. Most consumers purchase a PC from a PC manufacturer which already has put together on their behalf a bundle of an operating system and a media player."

The commission ruled that Microsoft bundled its own audiovisual player to damage such rivals as RealNetworks RealPlayer and Apple Computer Quicktime.

Microsoft has said it will take the decision to European Union courts in Luxembourg and try to get the remedies delayed until final appeals are over, a process that could take four to seven years or more.

Although that limits the impact of the decision, the commission has shown no inclination to slow two other investigations of Microsoft it now has under way.
It will be able to cite the precedent from its decision on Wednesday in bringing the next cases, easing the way for quicker action, experts say.
The decision to go for a broad remedy follows a decade of investigations and settlements on narrow issues without any formal findings against the software firm.

A U.S. appeals court ruled unanimously in a final 2001 decision that Microsoft broke antitrust rule, but critics say the remedies there failed to encourage vigorous competition.

The commission fine exceeds the record 462 million euro penalty imposed on Switzerland's Hoffman-La Roche AG in 2001 for leading a vitamin cartel.

Nonetheless, it amounts to slightly more than one percent of Microsoft's roughly $53 billion cash on hand. On Jan. 22 it projected expected revenues of $8.6 billion and operating income of $3.1 billion for the current quarter.

© Reuters 2004. All Rights Reserved.

[Timber Loftis]

OH, great, another success tax on Microsoft.

I'm no fan of MS, but let me tell you what this new ruling means to us consumers: fewer easy-to-use functions bundled with windows and more time online trying to download programs to run applications that should just "happen" on a new computer. In the US, and now in Europe, we consumers are not being served. Great -- order them to unbundle windows media player so you can force me the consumer to download one of two programs (that contain oodles of spyware and perform equally crapily) just so I can play simple files my computer should play straight out of the box. Thanks a lot.

On the other hand, if MS would charge a reasonable rate for its programs ($500 for MS Office is just plain stupid), it might not be in such hot water to begin with.

[Illumina Drathiran'ar]

I'm with Timber on this one. I really don't like Microsoft, but you don't get this far in the business world without having a damn good product. There's a reason that Windows is prevalent now... besides the near-monopoly.

I'm not even going to touch Microsoft Office. Or even Microsoft Word. It's in the neighborhood of $100, is it not? Screw that. I'm a college student! I can't afford that... And Windows Media Player? In my opinion, it's easier to use than RealPlayer. I use the WMP all the time. It's playing music for me right now. I honestly don't see what the problem is. It doesn't even nag at me to upgrade to premium services whenever I open it or close it like certain other media players I could mention.

[Timber Loftis]

More Microsoft a-go-go.
_______________________________
NY Times:

March 24, 2004
Newly Released Documents Shed Light on Microsoft Tactics
By JOHN MARKOFF

Even as Microsoft prepares to face penalties from the European Union, which accuses the company of abusing the Windows monopoly, new details about the tactics Microsoft used to secure a dominant position in software markets for nearly two decades are emerging in a state courthouse in Minneapolis.

Testimony during the second week of trial in the consumer class-action lawsuit in Minnesota has revealed some embarrassing internal documents from Microsoft which were not disclosed in the bitter 1997 federal antitrust lawsuit that focused on the company's attempt to control the browser markets in the 1990's.

Among the documents introduced in court this week was a letter from June 1990 in which Bill Gates, Microsoft's chairman, told Andrew S. Grove, the chief executive of Intel at the time, that any support given to the Go Corporation, a Silicon Valley software company, would be considered an aggressive move against Microsoft.

Other evidence presented by the plaintiffs' lawyers at trial yesterday gave an account of how Microsoft violated a signed secrecy agreement with Go and showed that Microsoft possessed technical documents from Go that it should not have had access to.

A Microsoft spokeswoman said that many of these newly disclosed documents were not relevant to the trial, which focuses on Microsoft pricing actions.

"These are very old documents, taken out of context for the sole purpose of obscuring the real issue of this case," said Stacy Drake, the Microsoft spokeswoman.

But lawyers for the plaintiffs contend that the documents show how Microsoft unfairly dominated the market. "All of Microsoft's conduct was designed to acquire and hang on to their monopoly,'' said Eugene Crew, a lawyer at Townsend, Townsend & Crew, based in San Francisco. "Consumers were harmed by being deprived of choice. The greatest harm out of the Go story was the suppression of innovation and new technology by Microsoft."

Microsoft has already paid $1.6 billion in its efforts to settle consumer antitrust claims filed in 10 states.

The new lawsuit, which contends that Microsoft overcharged Minnesota customers from 1994 to 2001, seeks almost $500 million from the company. If the company, based in Redmond, Wash., loses, it could also be forced to pay triple that amount under Minnesota state law.

This week, the lawyers representing the Minnesota consumers are focusing on Microsoft's efforts to undercut Go, a start-up company that was developing an operating system for hand-held computers.

The first witness appearing at the trial yesterday was Jerry Kaplan, the co-founder of Go. Mr. Kaplan, who was a software developer at the Lotus Development Corporation before he started Go, has been a longtime opponent of Microsoft.

Yet he said he was surprised by what was revealed about Microsoft's activities in the documents. "I was shocked," Mr. Kaplan said in a telephone interview. "This was a corporate mugging that went uncorrected and unknown."

The events surrounding the failure of Go have often been cited as a reason for the animosity between Silicon Valley executives and Microsoft. Go was one of the most prominent efforts by Silicon Valley entrepreneurs and venture capitalists to create software for tablet-sized devices. In addition to an all-star cast of technologists, the start-up had backing from major industry players like I.B.M., Intel and AT&T.

The plaintiffs contend the new documents show that Microsoft violated nondisclosure agreements with Go, and then used that information to build PenWindows, a competitor to Go's PenPoint operating system. The documents included Microsoft's internal e-mail messages showing that it had detailed knowledge of Go's product plans.

The documents also suggest that Microsoft sought to pressure Intel to cancel its plans to invest in Go. On June 28, 1990, Mr. Gates wrote a letter to Mr. Grove trying to convince the Intel executive that he should back a version of Windows for portable computers, then code-named Windows-H, rather than Go's PenPoint software.

"I guess I've made it very clear that we view an Intel investment in Go as an anti-Microsoft move, both because Go competes with our systems software and because we think it will weaken the 386 PC standard," Mr. Gates wrote.

Shortly after the letter was written, according to Mr. Kaplan, Intel reduced its planned investment in Go from $10 million to $2 million, and stipulated the investment be kept a secret.

An Intel spokesman declined to comment on the events.

Silicon Valley executives said that Microsoft's aggressive behavior in the early 1990's led to a widespread belief among technology companies that Microsoft was using its operating system monopoly and unfair tactics to compete in markets where its technology was inferior.

Microsoft was well aware of this perception, and in 1991 tried to alter the way the company was viewed.

In a document titled "Microsoft Criticism," the company's outside public relations consultants recommended training for its executives on "personal demeanor and style." The advice read in part that the focus should be shifted from "killing the competitor" to "providing a better solution to the customer's problems."

"It's a bit of artifact, but in its day it was a good memo," said Marianne Allison, an executive at Waggner Edstrom, Microsoft's longtime public relations firm.

In late 1993, Go was sold to AT&T where it was ultimately merged into the company's portable computer subsidiary. In 1994 the phone company shut down the effort in portable computing. Three months later Microsoft canceled its PenWindows project.

In 1996, Mr. Kaplan wrote a book, "Start-Up: A Silicon Valley Adventure" (Penguin USA), in which he blamed Microsoft, in part, for the demise of Go. Two years later, Marlin Eller, a former Microsoft programmer who was part of the PenWindows project, wrote in "Barbarians Led by Bill Gates" (Owl Books) that the intent of the PenWindows project had been primarily to undermine Go.

[ 03-24-2004, 11:52 AM: Message edited by: Timber Loftis ]

[Skunk]

Originally posted by Timber Loftis: On the other hand, if MS would charge a reasonable rate for its programs ($500 for MS Office is just plain stupid), it might not be in such hot water to begin with.

I think that you've hit the problem on the head there. It isn't the success of Microsoft that is causing the problems, it is how it uses that success. Microsoft's strategy has been the same for years - crush the competition (often in an underhand way like IE) then, when the competiton no longer exists - shift the prices up and all but stop innovating the product.

This doesn't serve the public's interests in the slightest - and even helps to stagnate the market. Look at how healthy competition between AMD and Intel has brought ENORMOUS benefits. It forced both companies to engage in serious R&D and to keep prices down - which in turn has benefited other industries and the public at large in inmeasurable ways. I doubt very much that there would be such a thing as a 3.4GHz processor had AMD never existed - at least not for another five to ten years and if it did, I doubt that it would be available for under $1000...

[Azred]

I have never seen any compelling argument that has convinced me why Microsoft shouldn't be allowed to bundle whatever software it chooses. If you go to buy a Ford, shouldn't you be allowed the choice of a Chevrolet engine? If not, then the Ford technology is "bundled", and that apparently isn't right. Shouldn't you have the choice of having McDonald's fries with your Sonic burger?
The world is business is dog-eat-dog. Yes, it is a shame that many software companies are not as large as Microsoft, but Microsoft was there first. If you have a software company whose product outperforms a comparable Microsoft product then you must use every avenue available to let customers know that your product is better, even if that means giving away free samples at technology shows or to tech magazines to generate some positive press.

Strangely enough, the one thing that Microsoft has always adamantly refused to do--release Windows source code--is the one thing that would catapult them to even greater success. The source code would allow all sorts of programmers and companies to create new applications. Naturally, set it up so that creation of a product using Windows source code means that the developer must pay Microsoft a royalty on profits generated from that product in perpetuity. Now that a net present value that would make a CFO faint from joy!

[Oblivion437]

What's funny is that the EU is going to have a hell of a time enforcing this fine. He could just pull all his properties out of Europe, and thumb his nose at them. You know this administration isn't going to help the EU...

[skywalker]

Originally posted by Skunk: I think that you've hit the problem on the head there. It isn't the success of Microsoft that is causing the problems, it is how it uses that success. Microsoft's strategy has been the same for years - crush the competition (often in an underhand way like IE) then, when the competiton no longer exists - shift the prices up and all but stop innovating the product. This doesn't serve the public's interests in the slightest - and even helps to stagnate the market. Look at how healthy competition between AMD and Intel has brought ENORMOUS benefits. It forced both companies to engage in serious R&D and to keep prices down - which in turn has benefited other industries and the public at large in inmeasurable ways. I doubt very much that there would be such a thing as a 3.4GHz processor had AMD never existed - at least not for another five to ten years and if it did, I doubt that it would be available for under $1000...

Just as a parallel:

Why is it not okay for Microsoft to crush the competition, but it is just fine for Walmart to do it? Since Walmart came to town every single discount or department store in my area has been driven out of business.

Y'know Microsoft, as far as I know, does not pay people poor wages or buy products from overseas manufacturers that exploit children and who pay less than a dollar per day to their workers. Microsoft does not hire illegal aliens to clean their offices.

I wonder how many millionaires has Walmart made out of their workers.

Microsoft is just the company many people love to hate. Everyone loves Walmart because they sell things for less, but at what price?

Mark