Microsoft awaits word on EU fine

The two sources said Microsoft must be in full compliance with the European Commission's landmark antitrust decision of March 2004 by the end of the month, or face a further fine of up to 3 million euros, or $3.8 million, a day.

The penalty could be backdated to Dec. 15, when the European Commission set a deadline for the company to comply with its antitrust order to share information with rivals to allow interoperability.

"We have never, ever, had to fine a company for failure to respect an antitrust decision," said Jonathan Todd, a spokesman for the European Commission. "This is the first time since the European Union was formed" approximately 50 years ago, he said.

Microsoft has pledged to deliver documents by July 18 to be in compliance.

The Commission's Competition Bureau, headed by Neelie Kroes, outlined its proposed action against Microsoft on Monday to an antitrust advisory committee of the European Union's 25 member states. Although the advisory committee provided input, the ultimate decision to determine the size of the fine rests with the Commission, which will announce its decision on Wednesday, Todd said.

The issue of noncompliance dates back to 2004, when the Commission demanded that the software giant unbundle its media player from its operating system, as well as provide complete and accurate protocol information to workgroup server rivals to ensure full interoperability with Windows PCs and servers.

That order came with a record fine of 497 million euros ($613 million), which Microsoft has already paid and is in addition to the fines it will face Wednesday.

Microsoft has repeatedly complained that the Commission has been vague on the type of information it has been seeking and that it did not give the software giant enough time to respond to the changes sought.

The company, responding to the March 2004 order, delivered the first draft of its documentation later that year. The Commission, however, responded the following year that the information regarding the formatting and the ability for rivals to distill relevant code information were not adequate. The Commission set a deadline of Dec. 15, 2005, for the software giant to comply with the order.

"Microsoft asked for guidelines on how to get into compliance, and six days before the deadline, Microsoft received draft comments from the Commission's monitoring trustee, Neil Barrett," said Tom Brookes, a Microsoft spokesman.

In April, Barrett met with Microsoft and developed a template for the software maker to enter the batches of protocols and a schedule for when the information was due, Brookes said.

Seven milestones were established, six of which were to be delivered by June 30 and the seventh by July 18.

Microsoft received feedback from the trustee's team on each batch of protocols submitted, regarding whether the content was sufficient or needed changes. Revisions were resubmitted with the next batch of protocols or sometimes beforehand, Brookes said.

"This is where Microsoft is focused," Brookes said. "A number of documents have made it into the 1.0 state, and Microsoft's engineering team feels it's going well."

Should the European Commission find Microsoft has come into compliance over the past weeks or months, it will not be enough to stop the regulators from issuing a monetary fine, given it is retroactive to Dec. 15.

And if European antitrust regulators determine Microsoft remains out of compliance with the 2004 order, it could fine the software maker up to 5 percent of its average daily revenue based on the past year. That could translate into a daily fine of up to $5.45 million a day--more than double the potential level Microsoft currently faces.

The Commission in March expressed concerns regarding Microsoft's upcoming Vista operating system

The European litigation has been costly for Microsoft. The software giant could face as much as a $535.5 million fine for the compliance issue, in addition to the $613 million it has already paid when the order was instituted in 2004. Add to that a number of sizable lawsuits it settled with rivals that also had issued complaints to the European Commission.

Microsoft settled with Sun Microsystems for a whopping $1.95 billion, $700 million of which addressed antitrust related litigation. It also paid out $460 million to RealNetworks to resolve antitrust litigation.

One antitrust attorney in Europe said that given a choice between the fines and legal settlements against Microsoft and a change in the software giant's actions, competitors would choose the latter.

He added that the interaction between the Commission and Microsoft is likely one that will not be repeated by other players in the industry.

"This is very different than anything I've ever seen," the attorney said. "I have seen some cases where there's been noncompliance around the edges of a case, but never anything like this before or close to the ballpark. I would be surprised if we see anything like this ever happen again."