Microsoft Balks at Expected Antitrust Fine

BRUSSELS -- Microsoft will be fined $610 million by the European Commission on Wednesday for abusing its monopoly in computer operating systems, a person close to the company said Monday.

The fine, which was set late last week after settlement talks with Microsoft broke down, was backed by national competition regulators from the 15 Union member states Monday.

Microsoft says the fine is too big.

Announcement Wednesday

"In view of the absence of a clear legal standard under EU law, a fine of this size isn't warranted," says Tom Brookes, a Microsoft spokesperson in Brussels.

On Tuesday, the fine is to be discussed by senior aides to all 20 commissioners before being brought up at the EC's final meeting on the case Wednesday morning.

Microsoft would then be officially informed of the fine and sent a summary of the ruling by fax. Mario Monti, competition commissioner, has scheduled a press conference to announce the decision.

People close to Microsoft were speculating over the weekend that the commission would not issue any fine at all.

"In previous antitrust cases, the commission has waived a fine in cases where the company involved didn't know it was breaking European antitrust law," the source says, adding, "Microsoft could argue that it didn't know until now that its behavior broke the rules."

"We have already told Microsoft many times that a negative ruling will incur a fine," says Amelia Torres, Monti's spokesperson. "A small company could claim it didn't know the rules but not one the size of Microsoft."

Restrictions Expected

The Commission is expected to rule on Wednesday that Microsoft has twice abused the monopoly position of Windows. By withholding vital information about Windows from makers of server software, the firm kept an unfair advantage in the market, the Commission has apparently decided. It also competed unfairly by bundling its Media Player software into Windows, the ruling is expected to find.

The commission is expected to announce remedies to restore competition. It is likely to require Microsoft to sell two versions of Windows to PC vendors in Europe, one of them with Media Player stripped out.

It will also have to share more Windows code so rival server software makers can compete more fairly with Microsoft server software, according to people close to the case. Computer servers drive networks of PCs.

Some analysts say these remedies are more important than the fine in terms of making an impact on Microsoft. The company has over $50 billion in cash reserves and has already set some of that aside for covering legal costs.

Wednesday's ruling will set a precedent which could strengthen any legal challenge of alleged monopoly abuse by Microsoft. Development of the next generation of Windows, which is code-named Longhorn, could be affected, some analysts said.

"The ruling may have a significant impact on the planning for Longhorn," says Dan Kusnetzky, an IDC analyst.

After negotiations toward a settlement of the charges collapsed last week, Microsoft's chief counsel, Brad Smith, said the company will appeal any ruling at the European Court of First Instance.

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