October 22, 2007 / 2:42 PM / in 10 years

Microsoft finally bows to EU antitrust measures

5 Min Read

<p>A man walks by the logo of Microsoft in a shop in Brussels, September 17, 2007.Sebastien Pirlet</p>

BRUSSELS (Reuters) - Microsoft Corp (MSFT.O) ended three years of resistance on Monday, finally agreeing to comply with a landmark 2004 antitrust decision by the European Commission.

The defeated software giant announced it would not appeal against a decisive European Union court ruling two months ago that backed the bloc's executive Commission.

"The repercussions of these changes will start now and will continue for years to come," Competition Commissioner Neelie Kroes told a news conference, adding that Microsoft's agreement would have "profound effects" on the software industry.

"It is a victory for the consumer," she said.

Microsoft, which was fined nearly half a billion euros in 2004 and a further 280.5 million euros (195.6 million pounds) in 2006 for non-compliance, faced the prospect of steep new fines if it did not accommodate the Commission.

"As from today Microsoft has established compliance, no doubt about that," Kroes said. "There is no reason to impose further penalties on Microsoft as of this day."

But Microsoft still faces fines for lack of compliance between 2006 and now, potentially reaching hundreds of millions of euros.

Among other reversals, Microsoft will make available to so-called "open source" software developers information they need to make their programmes work smoothly with Microsoft's Windows operating system for personal computers.

Microsoft also slashed high royalties that commercial firms would pay for that interoperability information.

Microsoft suffered a major legal defeat in September when the EU's second-highest court backed the Commission on all major points, ruling the world's largest software maker abused its dominant market position to crush rivals.

Microsoft's Windows runs on 95 percent of the world's personal computers. The Court of First Instance said Microsoft must give rival makers of server software information they need to connect smoothly to Windows desktop software.

Office desktop PCs use work group server software made by Microsoft and others to sign on to, print and access files.

Microsoft drastically altered its royalty programme on the interconnection information as part of its agreement.

Open source software developers, such as Samba, will be able to access and use the interoperability information and Microsoft will assert no patent rights against them.

Commercial developers such as IBM or Red Hat must pay a licence fee of 0.4 percent of revenues to Microsoft when they redistribute that software, to protect against patent challenges.

That is far less than the 5.95 percent Microsoft had demanded, but it was unclear whether it would meet Samba's General Public License prohibiting any royalties.

"We will have to wait and see what the actual documents are," said Carlo Piana, a lawyer for Samba in Milan.

Those who do not need interconnnect information on which Microsoft claims patents can make a one-off payment of 10,000 euros for a licence.

As Microsoft updates its software or adds new software that, too, will be covered by the decision. Disagreements will be settled in London's High Court.

Microsoft said its discussions with the Commission were constructive and it "will continue to work closely with the Commission and the industry to ensure a flourishing and competitive environment for information technology".

The non-profit European Committee of Interoperable Systems expressed satisfaction with the commission's pursuit of Microsoft.

"As always, it is essential that the commission continues vigorously to monitor Microsoft's compliance," the organization said in a statement.

Microsoft's new stance was signalled earlier this month, when the company withdrew from an appeal against a South Korean antitrust ruling. It had appealed to the Seoul High Court.

Kroes personally negotiated with Microsoft Chief Executive Steve Ballmer in conversations and over a meal at a restaurant near her hometown of Rotterdam, in the Netherlands, she said.

"I paid for the dinner," she told the news conference.

Additional reporting by Emma Davis

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