Microsoft Faces Possible Fine

European commission threatens retroactive measure over antitrust order.

The European Commission, the executive body of the European Union, again has rapped Microsoft Corp. on the knuckles, this time warning the Redmond, Wash., software maker that it could face a retroactive fine of up to $2.37 million a day for failing to comply with the commissions antitrust order.

The fine, if levied, will be retroactive to Dec. 15 and continue until a final decision is made in the case, the commission said late last month.

The move follows the commissions March 2004 order that Microsoft disclose complete and accurate interface documentation to workgroup server competitors to allow full interoperability with Windows PCs and servers. The commission also hired a trustee to monitor Microsofts compliance and set Dec. 15 as the deadline for Microsoft to meet the conditions of that order—which the commission says the company appears not to have done.

Last October, the commission said it had appointed British cyber-crime expert Neil Barrett to assist in overseeing Microsofts compliance with the 2004 antitrust decision. Barrett was one of several candidates put forward by Microsoft. He holds visiting professorships with two English universities and has served in senior roles in the private sector, notably a six-year stint with Groupe Bull ending in 1999.

Barrett has appeared in court as a computer expert in a wide variety of criminal cases, has run security evaluations for government and private-sector organizations, and frequently delivers talks and university seminars on computer crime and other subjects.

"The Statement of Objections indicates that the commissions preliminary view, supported by two reports from the monitoring trustee, is that Microsoft has not yet provided complete and accurate specifications for this interoperability information," the commission said.

Microsoft has five weeks from the commissions issuance of its Statement of Objections to respond. After consulting with the advisory committees of member state competition authorities, the commission then will decide whether to impose the fine on Microsoft.

"I have given Microsoft every opportunity to comply with its obligations. However, I have been left with no alternative other than to proceed via the formal route to ensure Microsofts compliance," Neelie Kroes, the European commissioner for competition, in Brussels, Belgium, said in a statement.

Barrett, the monitoring trustee, also said in the report quoted by the commission in its statement that "Any programmer or programming team seeking to use the Technical Documentation for a real development exercise would be wholly and completely unable to proceed on the basis of the documentation. The Technical Documentation is therefore totally unfit at this stage for its intended purpose."

However, Microsoft fired back at the commission, saying it plans to contest the Statement of Objections "to the full extent permitted under EU law, including a full oral hearing."

Company officials vigorously defended Microsoft and its actions, saying the Statement of Objections was unjustified. They referred to technical documentation that Microsoft revised and submitted last month at the commissions request, saying neither the commission nor the trustee had read or reviewed these new documents.

"In the interest of due process, we think it would have been reasonable for the commission and the trustee at least to read and review these new documents before criticizing them as being insufficient," Brad Smith, Microsofts general counsel, said in a statement.

"We have now responded to more than 100 requests from the commission. We continue working quickly to meet the commissions new and changing demands. Yet every time we make a change, we find that the commission moves the goal post and demands another change," Smith said.

He went on to list how Microsoft is fully committed to and has worked to comply with the commissions March 2004 order, saying the company has shipped a new version of Windows, paid a historically large fine and provided unprecedented access to Microsoft technology to promote interoperability with other industry players.

Of particular concern to Microsoft, Smith said, is the commissions latest demand that the internal workings of Windows be documented and licensed, which could open the door to the production of clones of parts of the Windows operating system.

During the Sept. 3, 2004, hearing with Bo Vesterdorf, president of the Court of First Instance of the European Communities, the commission clearly stated this is not within the scope of its decision. "Yet the commission confuses disclosure of the source code with disclosure of the internals and insists that it will fine the company if it fails to address this. We will continue to take new steps to address each new demand from the commission, in order to ensure our compliance with the commissions March 2004 decision in a timely manner," Smith said.