EU-Microsoft Talks Break Down

Last-minute talks between the European Commission and Microsoft CEO Steve Ballmer fail, and so the commission intends to impose stringent sanctions against Microsoft.

LONDON—Last-minute talks between the European Commission and Microsoft Corp. have stalled, and Europe now looks set to impose stringent sanctions against the company next Wednesday.

In a statement, Competition Commissioner Mario Monti said "a settlement on the Microsoft case has not been possible. I therefore intend to propose to my colleagues in the Commission next Wednesday to adopt a decision, which has already received the unanimous backing of member states."

It is understood that the decision includes a demand that Microsoft make available a discounted version of Windows that does not include Windows Media Player, effectively unbundling the video and audio software from the operating system. The decision may also include provisions to allow some of Microsofts competitors in the server market access to Windows source code. The EC may also levy a fine on Microsoft of up to 10 percent of its worldwide revenue.

The announcement came after last-minute talks between Monti and Microsoft CEO Steve Ballmer. According to Monti, the two "made substantial progress towards resolving the problems which have arisen in the past but we were unable to agree on commitments for future conduct." According to previous reports, the company had offered to distribute rival media player software with Windows on a separate CD-ROM, allowing users to install it if required.

"We worked very hard to try to resolve these issues without litigation," Ballmer said. "Because of the tremendous value we attach to our relations with governments all across Europe, we made every possible effort to settle the case, and I hope that perhaps we can still settle the case at a later stage."

Microsoft is accused of using its dominant position in operating systems to stifle competition in the growing media player market, as well as using its dominance on the desktop to boost its position in the low-end server market. In evidence given to the Commission last year, Real Networks Inc. claimed that the bundling of Windows Media Player was promoting the product at the expensive of its rivals.

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Editors Note: This story has been updated since its original posting to include comments from Microsofts Ballmer.

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