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Microsoft Hit With 280m Euro Fine
Craig Mason writes "The BBC Reports that "Microsoft has been fined 280.5m euros ($357m; £194m) by the European Commission for failing to comply with an anti-competition ruling.
The software giant was hit by the fine following a long-running dispute between the US firm and EU regulators.
The move follows a landmark EU ruling in 2004, which ordered Microsoft to provide rivals with information about its Windows operating system.
EU regulators also warned Microsoft it could face new fines of 3m euros a day.""
What happens if they don't pay?
Meta will eat itself
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Be yourself no matter what they say
I think the important point here is that the EU fined Microsoft and did not cave to pressure from the United States and interested third parties. There's no appealing this one. God bless the EU!
Now the question is will Microsoft comply?
In Microsoft's case this would be about $5.5m-a-day.'
http://www.ft.com/cms/s/c55bc756-1047-11db-8f6f-00 00779e2340.html
I would imagine that there would be stiffer penalties (i.e., non-financial aimed at curtailing MSFT's ability to trade in the EU) available if MSFT continued to defy the commission. If there were not this would be a de facto admission that companies can break the law in the EU with impunity if they are rich enough. I very much doubt the commission would tolerate that state of affairs.
This is my point. What would be the consequences of such inaction? Basically, the EU is seen to be powerless against mega-corporations. The law is subject to corporations, not the other way around. M$ would be perceived as above the law in the EU! Big, big trouble...
The only way the EU could actually enforce this would be to threaten, essentially, trade sanctions. But how heavily is the government, industrial and home market of every EU country saturated with M$ products? So they can't even impose anything worth a damn without incurring massively detrimental consequences themselves.
Think this through, seriously. It's frightening.
Meta will eat itself
The idea is that the EU claims (rather correctly, and you'll see why this is not an issue) that MS used it's desktop monopoly to attempt to gain a monopoly in the media player market. They were then forced to unnbundle WMP, which they did in Windows N. Also to pay that original fine we already heard about last year.
Now here's where you lost the trail; the contention now is NOT ABOUT WINDOWS MEDIA PLAYER. It's about underlying windows APIs that the EU claims MS is leveraging to use their DESKTOP os monopoly (which is okay) to shoehorn their way higher up in the server space. What they required MS to do was provide their competition with information about the windows OS that would let competing products interoperate as smoothly as microsoft products.
It's kind of a convoluted, complicated, and misreported case. The EU commision is saying "Look, you can't hide these details about your desktop os just so nobody can make a (whatever server) as good as yours, you can make the whatever server, but your competitors need to have equal footing. SO tell them how (whatever) works."
theres a bunch more, 12000 pages of docs, source code sharing (under a restrictive license competitors must pay for, this is more complicated due to the possibility of DMCA claims) etc.
just imagine what such an action would do to their credit rating
Ohhh I never thought of that. It will be a really huge problem for Microsoft if they ever need to purchase some new company cars but the bank won't loan them the money...
How will they cope?
I'll probably be modded down for this...
Market cap is not the important figure here, since that doesn't represent the actual capital that MSFT has on hand, but rather the market valuation of their shares. It's the income statement you want to look at.
For the FY ending 6/30/05, MSFT had a net income of US$ 12.2 billion. So, a fine of US $357 million IS significant -- it's roughly 3% of their net income.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
It's still less than they ended up paying Eolas for patent infringement, however.
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In fact, as with any situation where supply is (actually) relatively inelastic, if the supply side suddenly increased the price would drop dramatically. If Bill wanted to sell all his shares on Monday, how much do you think he would get for them? A lot, but nothing like the current price. The shares would be suspended as they started to go into freefall. Goes for houses, goes for Rembrandts, goes for shares. At one time during the Tokyo land price boom, Tokyo was capitalised at more, I believe, than the entire real estate of the US. Would you have swapped the US for metropolitan Tokyo?
Microsoft's market capitalisation is unimportant and meaningless; what matters is the effect of ongoing fines on their day to day operations, the market perception, and the buying decisions made by large institutions who will be reading all about it in the FT, Handelsblatt etc.
Pining for the fjords
But before we all bash them too too hard -- where, again, are the usable Linux desktops that we'd like to have to replace Windows???
Give us the documentationthen we will write you your Windows replacements!!! What do you think this whole case is about???
I'll probably be modded down for this...
Yes, I noticed that. However, the comparison is actually "Mac vs PC", not "Mac vs Microsoft". I can't buy a PC from Microsoft, I can buy a PC from Dell. Or HP. Or Fred down the road if I give him the cash to build one.
Dell, HP and Fred-down-the-road can bundle whatever applications they like. Years ago a lot of budget places used to bundle Lotus Smartsuite to keep their prices down vs bundling Office. So the comparison is valid. And yes, having no marketshare does rather free you from monopolist rules because, pretty much by definition, you're not a monopolist.
Cheers,
Ian
Are you sure?
I presume you're refering to figures on this page that puts MS's net income at US$12.25 billion (EU 9.63 billion) - Around 26m euros/day.
So, it would take them a little over 10 days to recover it, furthermore, you're comparing the fine for a single region to their world wide profits.
Its a pretty big deal, not just the cash, but the possibilities for further fines (or harsher penalties).
There are shills on slashdot. Apparently, I'm one of them.
Since you cant put a corporate entity in jail...
In the EU you can, sort of. Certainly in the UK, the board of directors are held directly responsible for the actions of the company. For example, there is a charge of "corporate manslaughter" here where the directors of a company can be put into prison for manslaughter if it can be shown that any deaths were caused by the actions of the company.
Put simply, if MS do not pay the fine, then the minute Bill Gates, Steve Ballmer, or any of the top brass set foot in the UK (and most likely other parts of Europe too), they would be immediately arrested for non-payment of fines.
Bob
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Paying the fine doesn't release them from having to comply with the ruling. They now have to pay the fine and comply with the ruling, otherwise further fines or sanctions are possible.
Oh no... it's the future.
Form a group with your fellow 2nd world countries.
Have you ever compared the GDP of the EU with that of USA?
I'll probably be modded down for this...
1) Yes, the EU can enforce the money. If MS doesn't pay, EU can hit them with sanctions (what do you think, how big is the EU part of MS revenue pool. Right, pretty relevant) and finally seize their physical assets. (Guess what, MS exists outside the US)
2) MS has no threatening potential against the EU. What should they do: Increase prices? --> antitrust case! Threaten to pull out? --> They would cut their own profits significantly. EU could immediately legalize copies from the US (they wouldn't, but let's say Win/Office is declared important for national security or something...)
3) The US government will not put pressure on the EU here. Yes, they may protest, yes, they may have some impact, but come on guys. Where not talking about some small banana republic. Also look at the history of the EU anti-trust comission. Remember the GE/Honeywell-merger?
4) Yes, the fine does matter. 280m is a lot of money also for MS, from end of July on it will be 3m/day=~1b/year=~8% of EBIT (probably increasing over time). Yes, that DOES matter. What will financial markets think of that, what will that do to stock options of MS managers?
Summary: MS will pay, MS will obey and try to comply (they already started, just too slow...) with the ruling, MS will of course continue to use all means of lobbying (which is their good right).
Now the more interesting question is, if they have a chance with their appeal before the European Court of Justice, which doesn't look too bad for them...
...next they'll be fining car manufacturers for selling cars with a specific brand of stereo/sound system and being anti-competitive.
Your knee-jerk argument doesn't really hold up. Let's try some slight modification and see if we can get it to work, eh?
Imaging one car manufacturer was responsible for producing 95% of the cars in circulation and aggresively used its position to limit the availability of cars from other manufacturers or the emergence of new manufacturers.
Imagine they not only bundled their own brand stereo with the car, they made it virtually impossible to remove the stereo system without causing severe damage to the car, so that even if you were to install an additional stereo you'd have to keep the original stereo.
Now imagine the car manufacturer starts using its imense wealth and market position to persuade content providers to release music encoded in a format only the above stereo can play (or charging hefty license fees to the smaller car/stereo manufacturers if they want to use this technology themselves to actually be able to play music).
Finally, imagine the car manufacturer went out into the world and used its wealth to influence political decisions in their favour to help them maintain an effective stranglehold on the market and, at the same time, insidiously "educate" people while they're still at school into thinking that only one car manufacturer can give them what they need.
Hope that helps.
Microsoft has a monopoly. Therefore, it's a pretty good assumption that they've done their market research and have already set the price of their products for maximum revenue generation: the point at which the sales you'd lose from increasing the price overwhelm the additional income. (There's probably an economics term for this point, but it's been a while...)
Any involuntary price increase at this point can't be a good thing for them, because (assuming rational behavior) they've already set their prices for optimum profit. Increasing them further might not make people immediately switch from Windows, but it could change purchasing patterns in other ways: slowing the upgrade cycle, making piracy or theft more attractive, etc.
True, most people would just bend over and take it, but Microsoft is already giving it to them as hard as they can -- forcing them to be harder isn't good for them. The damage to MS might be insignificant, though.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
This is just getting stupid.
M$ is getting F'd in the A because they built an o/s that a business 'chooses' to use. That business wants to get additional software that integrates with their servers as smooth as possible. Business chooses M$ software because it smoother than the competition (and not by much I must add).
I really don't understand???? Whats the problem here?
Because of something called a 'monopoly'. Microsoft have overwhelming dominance on the desktop. They are using that dominance to sell servers, which is a separate market. Using monopoly dominance in one market to influence sales in another is illegal.
Microsoft server software integrates more smoothly than the competition with their desktop systems because their desktop systems require specific protocols for this integration which Microsoft are keeping secret. Other systems have managed to replicate this only by reverse-engineering what is seen to go across networks.
Microsoft could easily have provided good integration with desktop systems using standard or existing protocols (they have proved in the past that they can produce quality implementations of such things).
None of this would matter if Microsoft were not effectively a monopoly presence on the desktop (that does not mean total dominance - it means enough presence to seriously influence other markets).
Clear now?
They can't really declare it freeware.
Of course they can. Assign a value of $X to the copyright of a single product, then the EU just assumes the copyright for it in lieu of the debt, and releases it at no charge. Seizure of assets happens all the time with real property - why is it so hard to think that it could happen with virtual property?
What happens when Microsoft did comply, how can you just take that back.
If MS paid the fine, do you think that the EU will be giving the money back if/when they comply?
It's a punishment, they're not supposed to get it back.
Competition: Commission Decision of 12 July 2006 to impose penalty payments on Microsoft - frequently asked questions
What is Microsoft required to do?
The European Commission's Decision of March 2004 required that Microsoft take various steps to put an end to its illegal and anti-competitive conduct (see IP/04/382 and MEMO/04/70). These included obligations to:
On 10 November 2005, the Commission warned Microsoft, pursuant to Article 24(1) of Regulation 1/2003, that should Microsoft not comply with these obligations by 15 December 2005, it would face a daily penalty payment of up to 2 million (see IP/05/1695). Article 24 of Regulation 1/2003 entitles the Commission to impose such penalty payments not exceeding 5% of average daily turnover in the preceding business year per calendar day to compel companies to put an end to infringements of EC Treaty anti-trust rules, where an infringement has been established by a previous Commission anti-trust decision.
Why has the Commission levied a penalty payment for non-compliance on only the failure to provide interoperability information, and not the terms on which that information is provided (i.e. the first and not the second of the two points from the 10th November 2005 Article 24(1) Decision)?
As regards the provision of information on reasonable terms, Microsoft has announced that it will review the pricing of its protocols once revised technical documentation has been submitted. Furthermore, a final assessment on the degree of innovation, if any, that is contained in the interoperability information, and hence the reasonableness of the royalties that Microsoft charges, can only be made once the technical documentation embodying that interoperability information is complete and accurate.
Why has the Commission decided that the fine levied should be 1.5 million per day?
Of the two elements of non-compliance identified in the Article 24(1) Decision, complete and accurate interoperability information is a prerequisite for interoperable work group server operating systems to be developed. Microsoft's non-compliance in this regard has eliminated the effectiveness of the remedy. Consequently, the Commission has taken the view that failure to comply in this respect should at this stage constitute a larger part of the daily penalty payment identified in the Article 24(1) Decision of 10 November 2005.
Why has the Commission taken today's Decision given that Microsoft is in the process of preparing revised technical documentation?
Microsoft's obligation was to comply with the March 2004 decision's requirement to make available the relevant technical documentation as of June 2004. As of 20th June 2006, Microsoft had not done that, and the Commission decided that it was appropriate to levy a fine on Microsoft for its non-compliance so far.
More than two years after the 2004 Decision, the Commission has therefore been obliged to resort to formal measures to ensure compliance. If any revised documentation that Microsoft submits proved to be complete and accurate, then Microsoft would not be subject to further daily penalty payments from the date on which complete and accurate technical documentation was provided. This would be the best outcome. However, if Microsoft continued t
At least give credit where it's due! And don't try to pass it as a true court transcript or whatever...
The AACS key is NOT 0xF606EEFD628B1CA427BEA93A9CA9773F