EU slaps Microsoft with Massive $1.35 billion fine

[Drogue]

Originally posted by Arrian
Can someone explain to me, in simple terms, what Microsoft did wrong?

MS were told their platform was anti-competitive, since they were using their Windows monopoly to gain entry into the applications market. It's the same issue as the US DoJ took to MS years ago. The basic idea is that if Windows isn't open to other applications developers to produce applications for, then it is stifling development of applications, and using one monopoly to bundle it's way into another one. It's interesting that the DoJ (and the first court) ruled that MS would have to be broken up, into an application company and an operating system company, and treat each others as separate entities. While this was overturned, it was largely because the DoJ underestimated the costs of breaking up the company.

As such, the EU told MS they would have to open up Windows to application developers, and could do so for a reasonable fee. I think they also defined what reasonable was. MS didn't comply, and charged what the EU believed was an unreasonable fee. As such, they were in breach for the ruling and get fined.

Now, this actually isn't an unprecidented situation. Many industries work with price capping on the use of gaining access to infrastructure: the big case in the UK at the moment is that banks charge too much money in fines when people go overdrawn, have late payments, etc. (the law is that fines must be enough only to cover the cost of processing the late payment or such). Also BT, who own the wired telephone network, and railtrack, who own(ed) the railway line, are regulated on how much they can charge others. If they weren't they would be able to leverage it's monopoly over the lines to become a monopoly over the provision of service - one train company and one telephone company - who could charge whatever they liked, not bother with innovation, and make huge profits, all at the expense of the consumer.

Price capping, in some situations (although very few), is economically efficient, it encourages innovation, and it generates a better impact on the consumer. That's why MS were ruled against, and that's why they've been fined for not abiding by the ruling. In exactly the way the DoJ did when they stopped abiding by the agreement they had with the DoJ years ago.

[Drogue]

Originally posted by Asher
I'm curious where this $2.5B now the EU has stolen from MS is going.

If you trade in a country you abide by its laws. Microsoft didn't. It's not stolen, they broke the law.

If a judge decides to issue a restraining order against you, prohibiting you from going with 100 metres of someone, and you go within that, you can expect a fine for worse. Exactly the same here. Microsoft were given a ruling by the courts, and they didn't abide by it.

Now, if you disagree with the law that's one thing, but just because you disagree with a law doesn't mean you aren't forced to abide by it.

[Asher]

Originally posted by Drogue
If you trade in a country you abide by its laws. Microsoft didn't. It's not stolen, they broke the law.

Please cite which law and when it was enacted.

[Drogue]

Originally posted by Asher
Please cite which law and when it was enacted.

The court's ruling. In the EU (as I believe in the US) a courts ruling is law unless it's overturned by a higher court.

If you're talking about the first case, EU competition law is quite clear that it is illegal to use market power in one industry to squash competition in another. The court decided that was what MS were doing.

[Asher]

Originally posted by Drogue
MS were told their platform was anti-competitive, since they were using their Windows monopoly to gain entry into the applications market. It's the same issue as the US DoJ took to MS years ago. The basic idea is that if Windows isn't open to other applications developers to produce applications for, then it is stifling development of applications, and using one monopoly to bundle it's way into another one. It's interesting that the DoJ (and the first court) ruled that MS would have to be broken up, into an application company and an operating system company, and treat each others as separate entities. While this was overturned, it was largely because the DoJ underestimated the costs of breaking up the company.

As such, the EU told MS they would have to open up Windows to application developers, and could do so for a reasonable fee. I think they also defined what reasonable was. MS didn't comply, and charged what the EU believed was an unreasonable fee. As such, they were in breach for the ruling and get fined.

This understanding is grossly flawed. Please explain how competitors could not build Media Players for Windows, for instance.

Price capping, in some situations (although very few), is economically efficient, it encourages innovation, and it generates a better impact on the consumer. That's why MS were ruled against, and that's why they've been fined for not abiding by the ruling. In exactly the way the DoJ did when they stopped abiding by the agreement they had with the DoJ years ago.

The issue here is specific to what MS charged for licensing/royalty fees which the EU sees as anti competitive but are actually fairly standard in the industry. You are overcomplicating the issue.

They were fined specifically due to the royalty nonsense, the stupidest part of the whole anti-trust case.

[Asher]

Originally posted by Drogue
The court's ruling. In the EU (as I believe in the US) a courts ruling is law unless it's overturned by a higher court.

Was this a court or a commission?

[Drogue]

Actually, Wiki's got a good article on competition law. Quoting from that:

Under EU law, very large market shares raise a presumption that a firm is dominant,[69] which may be rebuttable.[70] If a firm has a dominant position, then there is "a special responsibility not to allow its conduct to impair competition on the common market"[71]. Similarly as with collusive conduct, market shares are determined with reference to the particular market in which the firm and product in question is sold. Then although the lists are seldom closed,[72] certain categories of abusive conduct are usually prohibited under the country's legislation. For instance, limiting production at a shipping port by refusing to raise expenditure and update technology could be abusive.[73] Tying one product into the sale of another can be considered abuse too, being restrictive of consumer choice and depriving competitors of outlets. This was the alleged case in Microsoft v. Commission[74] leading to an eventual fine of €497 million for including its Windows Media Player with the Microsoft Windows platform. A refusal to supply a facility which is essential for all businesses attempting to compete to use can constitute an abuse.

That's the reasoning for the original fine. The latest fine is because they didn't stop doing it for a while.

Infact, the EU's website also states:

Microsoft had abused its dominant position under Article 82 of the EC Treaty, and required Microsoft to disclose interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers at a reasonable price.

Which also specifies the law broken.

Originally posted by Asher
Was this a court or a commission?

Court. The Court of First Instance, to be precise. The Commission decided the original decision, IIRC, but it was appealed to the courts, who ruled in September.

[Asher]

Originally posted by Oerdin
For once Wiggy the troll provides a useful link:



The court ordered MS to make parts of its OS code open so that rivals could make products which would work well with the rest of windows. MS has flatly refused to comply for four years thus the fines.

The BBC article is misleading. The issue right now has nothing to do with "opening up code" (XP SP2 provided the requested changes a long time ago).

MS was fined for "failing to comply with sanctions", specifically:

license the information "under reasonable and nondiscriminatory" terms.

Specifically:

According to the EU's ruling, Microsoft initially had demanded a royalty rate of 3.87 percent of a licensee's product revenues for a patent license and a rate of 2.98 percent for a license giving access to the secret interoperability information. In May 2007, following complaints by the Commission, Microsoft reduced its royalty rates to 0.7 percent for a patent license and 0.5 percent for an information license within the EU. Worldwide rates remained unchanged.

On October 22, 2007, Microsoft began providing a license that gives access to the interoperability information for a flat fee of 10,000 euros and an optional worldwide patent license for a reduced royalty of 0.4 percent of licensees' product revenues, the Commission said.

Now, anyone with technical understanding (that the EU commission clearly does not have) will understand that MS' licensing fees for MS' patent portfolio has no bearing on "locking out competition" to Windows. You do not need to license MS patents to use Windows or develop programs for it. MS compiled anyway to make this go away, but got hammered again.

The whole EU and DOJ proceedings illustrated alarming technical ineptitude on behalf of the government.

[Asher]

Originally posted by Drogue
Actually, Wiki's got a good article on competition law. Quoting from that:


That's the reasoning for the original fine. The latest fine is because they didn't stop doing it for a while.

Infact, the EU's website also states:



Which also specifies the law broken.


Court. The Court of First Instance, to be precise. The Commission decided the original decision, IIRC, but it was appealed to the courts, who ruled in September.

I like how the courts can make it law in September, MS can comply in October (reasonable), but MS can be fined for years retroactively. No, this isn't theft at all...

[Drogue]

Originally posted by Asher
Now, anyone with technical understanding (that the EU commission clearly does not have) will understand that MS' licensing fees for MS' patent portfolio has no bearing on "locking out competition" to Windows. You do not need to license MS patents to use Windows or develop programs for it. MS compiled anyway to make this go away, but got hammered again.

The whole EU and DOJ proceedings illustrated alarming technical ineptitude on behalf of the government.

That may be. However in a case of this magnitude there would be experts, both technical and economists, to argue about the effect of the fees on competition. Moreover, the court found in one way. Going against that is risky. MS gambled that the higher court would go against it, and thus didn't change until a while after. They upheld it, and MS was hit with a huge penalty for non-compliance.

[Drogue]

Originally posted by Asher
I like how the courts can make it law in September, MS can comply in October (reasonable), but MS can be fined for years retroactively. No, this isn't theft at all...

It was law in 2004 when it was first ruled on. MS appealed, and has now lost, thus the original ruling is upheld. They waited from the 2004 ruling until October to comply, hence the huge fine.

Edit: Actually, it was law from 1st January 1958.

[Asher]

Originally posted by Drogue
That may be. However in a case of this magnitude there would be experts, both technical and economists, to argue about the effect of the fees on competition.

The "experts" who testified against Microsoft were Apple, Sun, etc. I'm sure they are completely honest in their demands that result in their #1 competitor being handcuffed and fined.

Moreover, the court found in one way. Going against that is risky. MS gambled that the higher court would go against it, and thus didn't change until a while after. They upheld it, and MS was hit with a huge penalty for non-compliance.

They were fined for non-compliance during a period in which the ruling's validity was unknown. You do not see the problem here?

[Asher]

Originally posted by Drogue

It was law in 2004 when it was first ruled on. MS appealed, and has now lost, thus the original ruling is upheld. They waited from the 2004 ruling until October to comply, hence the huge fine.

You seriously don't see the problem with this?

The commission ruled in 2004. The courts didn't agree til recently. MS didn't action until the courts agreed. MS got fined for the time inbetween that the court sat on it and didn't rule one way or the other.

It's a money grab by a second-rate governmental organization.

[snoopy369]

Perhaps Drogue has a better understanding of EU law than you do?

Nahh...

[Wiglaf]

Asher, your understanding of the law is clearly very minimal to be making all of your extreme claims (eg ruling is fixed, no one on the court understands the technology involved but makes a ruling anyway, MS should not have to follow a ruling until all appeals exhausted, etc).