European Court Rejects Microsoft's Appeal, Fine Reduced to $1 Billion

The European court decision means that Microsoft will finally have to pay long-delayed fines of about $1 billion that were assessed in a 2004 antitrust case. However, the court reduced the original fine.

The long-running antitrust case against Microsoft by the European Commission may soon finally be completed after a European court upheld a $1 billion fine against the software giant that was originally announced four years ago.

"In an appeals ruling, the General Court of the European Union rejected Microsoft's request to dismiss the fine levied in 2008," according to a report from the Associated Press. The court did, however, reduce the fine by less than 5 percent to 860 million euros, or about $1.1 billion U.S. dollars, according to the Associated Press. The original fine amounted to about 899 million euros.

The court action "upholds the Commission's decision and rejects all the arguments put forward by Microsoft in support of annulment" of the case, according to AP.

The case, which began with a 1998 investigation, has dogged Microsoft for more than a decade with investigations, appeals and plenty of legal maneuvering, according to the history of the proceedings.

In March 2004, the EU hit Microsoft with a then-record fine of 497 million euros ($613 million) by the European Union for abusing its dominant market position with Windows. In that proceeding, the company was ordered to offer computer makers a version of Windows that didn't include the Windows Media Player. "According to Mario Monti, the European Competition commissioner, Microsoft had abused its dominance of the operating systems market both by tying Windows Media Player to Windows and by failing to release information about Windows to competitors in the server market," according to a report from that time.

Later, Microsoft was fined an additional 280.5 million euros for noncompliance in 2006 and another 899 million euros in 2008.

Rob Enderle, principal analyst with The Enderle Group, said that while there has been plenty of drama in the case over the years, it likely has helped Microsoft in the long run by teaching the company some important lessons about doing business on the world stage.

"When it began, they seemed to believe they were above the government," said Enderle. "They were very aggressive. And they really thought that the EU was made up of uninformed people. They very much felt that way initially about the U.S. Department of Justice, too."

That changed, though, as Microsoft officials realized that "they really were dealing with entities that had a level of power that they didn€™t initially comprehend, and they changed their entire approach."

That's when the company began to work within the system and became good at the issues that had brought the antitrust investigation to life in the first place, such as interoperability and licensing, said Enderle.

"They realized that what they were being asked to do wasn€™t inconsistent with their business model, that there was a different way to approach it," said Enderle.

When that happened, "things changed for the company and the fines started going away €¦ and the EU eventually moved on to other players," Enderle added.

While the $1.1 billion fine is still huge, the company "in many ways got a lot of value from the money," said Enderle. Microsoft has since gained interoperability experience, has developed a long-needed governmental lobbying body within the company and has become a capable political force.

"They gained experience which paid dividends in battling other companies such as Google in the marketplace today," said Enderle. "In the end, it may actually turn out that there were probably cheaper ways for them to get this experience, but it helps them."

In a statement, Microsoft said it still rejected the findings of the European Commission, which is the antitrust watchdog for the European Union.

€œAlthough the General Court slightly reduced the fine, we are disappointed with the Court's ruling,€ according to Microsoft. €œThe fine, which was paid several years ago, related to the price Microsoft had proposed for one of several forms of licenses for technology Microsoft was required to make available by the Commission's 2004 Decision. In 2009 Microsoft entered into a broad understanding with the Commission that resolved its competition law concerns.€