Week in review: Europe slaps Microsoft

European regulators slap hefty fine on Microsoft in their ongoing antitrust dispute, and more fines may be coming.

Steven Musil Night Editor / News
Steven Musil is the night news editor at CNET News. He's been hooked on tech since learning BASIC in the late '70s. When not cleaning up after his daughter and son, Steven can be found pedaling around the San Francisco Bay Area. Before joining CNET in 2000, Steven spent 10 years at various Bay Area newspapers.
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Steven Musil
5 min read
European regulators slapped a hefty fine on Microsoft in their ongoing antitrust dispute, and more fines may be coming.

The European Commission hit Microsoft with a $357.3 million fine, citing the software giant's continued noncompliance with its landmark 2004 antitrust ruling. That figure amounts to a daily fine of 1.5 million euros, which the Commission is prepared to increase to as much as 3 million euros per day if the software giant does not come into full compliance as of July 31.

While the fine is steep, Microsoft would have no trouble paying it. For the first three months of 2006, the company pocketed profits of nearly $3 billion on sales of $11 billion, meaning that the proposed fine amounts to about 10 days' worth of profits.

The fine was based on the Commission's 2004 ruling, which, among other requirements, ordered Microsoft to share complete and accurate interoperability information with rival companies that develop work group server operating systems. It also ordered the company to license those protocols at a reasonable cost.

Neelie Kroes, competition commissioner for the European Union, told CNET News.com that she had "no alternative" to issuing the fine.

"The daily penalty payment of 1.5 million euros that the Commission has imposed today for noncompliance on the first of these points reflects the fact that the failure to provide complete and accurate interoperability information has largely eliminated the effectiveness of the remedy," she said in a CNET News.com interview.

Industry trade groups weighing in on the Commission's decision fell into two camps. One side said the move will discourage U.S. businesses in Europe, while the other said it sets a precedent that will help smaller software companies.

The levying of the fine lit up News.com's TalkBack discussion boards, with many readers bemoaning the software giant's monopoly.

"It's like a convicted thief that was offered community service in place of a prison sentence," one reader wrote to the forum. "Now we find they skipped most of their community service."

Taming the Net
The FBI has drafted sweeping legislation that would require Internet service providers to create wiretapping hubs for police surveillance and force makers of networking gear to build in backdoors for eavesdropping, News.com has learned. FBI agent Barry Smith distributed the proposal at a private meeting with industry representatives and indicated that it would be introduced into the Senate.

The draft bill would place the FBI's Net surveillance push on solid legal footing. The FBI claims that expanding the 1994 Communications Assistance for Law Enforcement Act, known as CALEA, is necessary to thwart criminals and terrorists who have turned to technologies like Internet telephony.

On the other side of the Capitol, the U.S. House of Representatives voted to restrict Internet gambling. By a vote of 317 to 93, politicians approved a controversial bill that tries to eliminate many forms of online gambling by targeting ISPs and financial intermediaries, namely banks and credit card companies that process payments to offshore Web sites.

Net gambling "is a scourge on our society," said Rep. Bob Goodlatte, a Virginia Republican who has tried for the better part of a decade to enact legislation that combats Net gambling. One estimate puts revenues from Internet gambling at more than $10 billion a year.

Meanwhile, politicians accused MySpace.com and other social-networking sites of failing to protect minors from sexual predators and other malicious influences, and said a legislative crackdown may be necessary.

During a hearing before a House of Representatives subcommittee, politicians argued over the merits of compelling schools and libraries to cordon off access to social-networking sites by requiring some form of an Internet identification that would prove a person's age.

MySpace and other social-networking sites, such as LiveJournal and Facebook, have come under increased pressure from members of Congress hoping to appeal to voters before the November elections. The school- and library-filtering bill--called the Deleting Online Predators Act, or DOPA--is a centerpiece of a poll-driven Republican effort called the "Suburban Agenda."

In and out of court
The Bush administration's approval of the megamergers of AT&T and SBC Communications and of Verizon Communications and MCI was challenged by a federal judge. U.S. District Judge Emmet Sullivan said at the beginning of the hearing that he may not have enough information to permit the mergers to remain intact without major modifications.

Sullivan told attorneys for the telecommunications companies and the U.S. Department of Justice, which was defending the two deals, that he has "doubts" that the mergers would boost competition. "The public indeed has to have some confidence in these proceedings," Sullivan said.

In another high-profile court case, Apple Computer has abandoned its legal effort to unmask whoever leaked details about a still-unreleased music accessory. The company's deadline to continue a legal battle aimed at discovering who leaked the information to independent online journalists has passed, and Apple acknowledged in a brief court filing that it will not take its fight to the California Supreme Court.

The case drew national attention not only because it involved unreleased products, but also because it was one of the first to set the rules of how the rights of uncredentialed online journalists should be balanced against the rights of trade secret holders.

Meanwhile, a California judge dismissed a Web site's lawsuit against Google over its fall in the Google search index but left the door open for the lawsuit to be amended and refiled. KinderStart, a directory and search engine for information related to children, sued Google in March after it fell to a "zero" ranking in the Google index.

As a result of the ranking fall, traffic and monthly page views to KinderStart's Web site fell 70 percent or more, and the company's revenue from advertisements through Google's AdSense syndication program fell by more than 80 percent, according to the lawsuit.

Also of note
Intel will begin cutting about 1,000 manager jobs worldwide as part of an effort to become more competitive...Microsoft will no longer issue security updates or provide support for Windows 98 and Windows ME, which are still being used by more than 50 million people...The Department of Veterans Affairs said a series of missteps led to the theft of hardware containing data on millions of veterans and held up response after the fact.