MS Hits EU Deadline, Seeks Pricing Guidance

Microsoft on Monday gave the European Union’s antitrust regulators more information on its code-sharing program. The company also asked regulators for guidance on how much it can charge rivals for access to its Windows Server protocols.

The software giant was hoping to avoid possible additional fines on top of the nearly US$1 billion in penalties the European Commission has already asked the company for over the past three years.

The commission had set Monday as a deadline for Microsoft to move into compliance with the requirement that it offer other software makers access to its Windows Server communications protocols to make it easier for them to build compatible products.

The Sticking Point

The software giant faced fines of up to $4 million for each day it was not in compliance. The commission gave Microsoft more time to come into compliance after ruling on March 1 that the licensing program did not warrant high fees because it contained “no significant innovation.”

The requirement was contained in the EC’s 2004 ruling that Microsoft was behaving in violation of Europe’s antitrust laws and has proven the most difficult part of the decision for Microsoft to comply with.

The commission said it would study the latest information from Microsoft. Any new fines will likely be put on hold at least until that review takes place.

The sticking point now appears to be the price Microsoft can charge and still meet the EC’s requirement that access be made available at a “reasonable cost.”

New Penalties Looming?

Microsoft’s request for guidance came along with a related notice that it will not seek an oral hearing on the issue.

The licensing plan currently calls for Microsoft to receive up to 5.95 percent of future revenues from products made with the Windows code.

Earlier this year, Microsoft announced its first partner had joined the program and said others would be announced soon.

“We need greater clarity on what prices the [European] Commission wants us to charge, and we believe that is more likely to come from a constructive conversation than from a formal hearing,” Brad Smith, Microsoft’s general counsel, said in a statement.

The maneuvering comes as European antitrust Commissioner Neelie Kroes suggested the commission may need to consider remedies other than monetary penalties.

“It could be reasonable to draw the conclusion that behavioral remedies are ineffective and that a structural remedy is warranted,” Kroes said. She did not detail the remedies that might be sought, but noted the commission has the power to put structural remedies — such as barring a company from some markets — in place.

A decision on Microsoft’s appeal of the overall antitrust ruling is expected later this year.

Singled Out?

Microsoft has argued that it is being singled out by the EC and argues that while it has managed to settle with most of its private antitrust rivals and government regulators in South Korea and the U.S., its best efforts have fallen short in Europe.

Kroes responded last week by telling the American Bar Association that Microsoft stands to be the first company in 50 years to fail to comply with a decision of the Commission.

As the standoff wears on, it appears Microsoft is winning over more converts in the tech community, if not among the regulators themselves or the general public.

“Compared to what it was required do by the U.S. and other jurisdictions, the continued demands of European regulators start to seem insurmountable at some point,” Yankee Group analyst Laura DiDio told the E-Commerce Times.

Microsoft has said it spent millions of dollars compiling the server code — known as communications protocols — to enable more compatibility among competitor products. It also spent millions more settling private complaints with many of the same vendors — such as Sun Microsystems — that first spurred the European Commission to action.