European Competition Commissioner Neelie Kroes

The European Commission on Wednesday fined US software giant Microsoft,  a record €899 million for failing to comply with the Commission's March 2004 antitrust ruling.

The Commission said today that  until Oct. 22, 2007, Microsoft had charged "unreasonable prices for access to interface documentation for work group servers."

The 2004 decision, which was confirmed by the European Union's Court of First Instance in September 2007, found Microsoft guilty of having abused its dominant position, and instructed the company to open up its interface documentation to third-party developers at a reasonable price, allowing competitors to make their products work more smoothly with those of Microsoft's Windows operating system. The issue is termed interoperability and Microsoft failed to comply with the 2004 ruling for three years, charging initially too high royalty rates, the Commission said.

“Microsoft was the first company in fifty years of EU competition policy that the Commission has had to fine for failure to comply with an antitrust decision",said European Competition Commissioner Neelie Kroes. "I hope that today's Decision closes a dark chapter in Microsoft's record of non-compliance with the Commission’s March 2004 Decision and that the principles confirmed by the Court of First Instance ruling of September 2007 will govern Microsoft's future conduct".

The Commission’s Decision of March 2004 requires Microsoft to disclose complete and accurate interoperability information to developers of work group server operating systems on reasonable terms. Microsoft subsequently paid the €497 million that was levied on it at that time.

Initially, Microsoft had demanded a royalty rate of 3.87% of a licensee's product revenues for a patent licence (the "patent licence") and of 2.98% for a licence giving access to the secret interoperability information (the "information licence"). In a statement of objections of 1 March 2007, the Commission set out its concerns regarding Microsoft's unreasonable pricing (IP/07/269). On 21 May 2007, Microsoft reduced its royalty rates to 0.7% for a patent licence and 0.5% for an information licence, as regards sales within the EEA (European Economic Area), while leaving the worldwide rates unchanged.

Only as from 22 October 2007 did Microsoft provide a licence giving access to the interoperability information for a flat fee of €10 000 and an optional worldwide patent licence for a reduced royalty of 0.4 % of licensees’ product revenues (seeIP/07/1567).

Today’s Decision concludes that the royalties that Microsoft charged for the information licence – i.e. access to the interoperability information - prior to 22 October 2007 were unreasonable. Microsoft therefore failed to comply with the March 2004 Decision for three years, thereby continuing the behaviour confirmed as illegal by the Court of First Instance. Today's Decision concerns a period of non-compliance not covered by the penalty payment decision of 12 July 2006 (see IP/06/979) starting on 21 June 2006 and ending on 21 October 2007. The Decision does not cover the royalties for a distinct patent licence.   

The Commission said that it has based its conclusions as to the unreasonableness of Microsoft's royalties prior to 22 October 2007 on the lack of innovation in a very large proportion of the unpatented interoperability information and a comparison with the pricing of similar interoperability technology.