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Europe threatens Microsoft with daily fines

Software giant faces fines of up to $2.37 million a day unless it complies with year-old order related to EC antitrust ruling.

The European Commission issued Microsoft a warning on Thursday that it could face a retroactive fine of up to $2.37 million a day for failing to comply with its antitrust order, based on its preliminary review.

The European Union's executive arm noted that the clock started ticking Dec. 15 and will continue until it makes its final decision in the landmark case against the software giant.

Microsoft was ordered by the Commission in March 2004 to disclose complete and accurate interface documentation to work group server competitors, in order for them to have full interoperability with Windows PCs and servers. That order was part of the Commission's findings that the software giant allegedly abused its market dominance to increase its presence in the work group, server operating system and media player industries.

The Commission, which held discussions with Microsoft about its compliance with its order and hired a trustee to monitor the company's compliance, set a Dec. 15 deadline for meeting the stipulations of its order. That order required Microsoft to supply complete and accurate interoperability information, making its software available on reasonable terms.

"I have given Microsoft every opportunity to comply with its obligations. However, I have been left with no alternative other than to proceed via the formal route to ensure Microsoft's compliance," Neelie Kroes, European competition commissioner, said in a statement.

Microsoft has five weeks to respond to the Commission's statement of objections. The Commission, which will consult with the advisory committees of member state competition authorities, would then issue a decision on whether to impose its fine of up to $2.37 million a day on Microsoft. The fine will be retroactively applied to Dec. 15 and the date that the Commission reaches a final decision on whether Microsoft has complied with its order.

Microsoft said it plans to contest the Commission's statement of objections and request an oral hearing on the issue.

"We believe today's statement of objections is unjustified. The Commission has issued this statement regarding technical documentation we submitted last week, even though, by its own admission, neither it nor the trustee have even read or reviewed these new documents," Brad Smith, Microsoft general counsel, said in a statement.

He added that the software giant is committed to complying with the Commission's order, noting that a new version of Windows has been shipped without the media player bundled in and that the company has given its competitors "unprecedented access to Microsoft technology."

"Of particular concern is the Commission's latest demand, that the internal workings of Windows be documented and licensed, which can open the door to the production of clones," Smith said in a statement, noting that a European court determined that such a demand is not within the scope of the Commission order. "The Commission confuses disclosure of the source code with disclosure of the internals and insists that it will fine the company if it fails to address this."

The Commission's trustee, however, found that material Microsoft provided to third parties failed to serve a useful purpose.

"Any programmer or programming team seeking to use the technical documentation for a real development exercise would be wholly and completely unable to proceed on the basis of the documentation," Neil Barrett, Commission monitoring trustee, said in a statement.

"The documentation appears to be fundamentally flawed in its conception, and in its level of explanation and detail," Barrett added. "Overall, the process of using the documentation is an absolutely frustrating, time-consuming and ultimately fruitless task."

The trustee advised that the documentation would need a "drastic overhaul," in order for it to be considered useful.

Microsoft contended that its latest revision should be reviewed by the Commission and trustee before complaints are issued.

"We revised the technical documents last week, at the Commission's request," Smith said in a statement. "In the interest of due process, we think it would have been reasonable for the Commission and the Trustee at least to read and review these new documents before criticizing them as being insufficient."

Once an oral hearing is held and, if the Commission ultimately renders a final decision unfavorable to the Redmond, Wash.-based software giant, the Commission may take up the issue of continuing with its daily fine until it believes that Microsoft has complied with its order.

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