EU Threatens Microsoft with Daily Fines

The European Commission on Thursday threatened to hit Microsoft with a 2 million euro daily fine for refusing to open Windows to third parties. Microsoft criticized the announcement by saying the EU doesn't understand the difference between opening source code and APIs.

In March 2004, the EU ordered that Microsoft give competitors access to certain Windows networking protocols, which "would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers." The demand was in addition to a 497 million-euro fine and a requirement that Microsoft strip Media Player from Windows XP.

The Redmond company has fought the request from the start, saying any public release of its source code has "far-reaching implications for the protection of our intellectual property rights around the world." Microsoft appealed the ruling in August and asked for support from other tech companies in November.

But last December, the European Court of First Instance rejected an appeal to suspend all of the antitrust sanctions, saying Microsoft faced a daily fine if it did not comply by December 15, 2005. Since then, a Monitoring Trustee has been tracking the company's progress.

"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 Microsoft's compliance," EU Competition Commissioner Neelie Kroes said in a statement.

In a response early Thursday, Microsoft called the EU's Statement of Objection "unjustified," and claims, "the Commission confuses disclosure of the source code with disclosure of the internals."

"Of particular concern is the Commission's latest demand that the internal workings of Windows be documented and licensed, which can open the door to the production of clones of parts of the Windows operating system," Microsoft General Counsel Brad Smith said in a statement.

Smith also attacked the Monitoring Trustee, saying he did not take into consideration revised documentation provided by the company. "The Commission has issued this Statement regarding technical documentation we submitted last week, even though by its own admission neither it nor the Trustee have even read or reviewed these new documents."

"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," Smith added. Microsoft says it will contest the EU's decision to impose fines and ask for a full Oral Hearing on the issues.

Indicating Redmond's frustration, Smith noted that, "In total, we have now responded to more than 100 requests from the Commission. We continue working quickly to meet the Commission's new and changing demands. Yet every time we make a change, we find that the Commission moves the goal post and demands another change."

But Microsoft's appeal and request for an Oral Hearing won't delay the levying of fines against the company. It has until January 25 to respond and prove it is in compliance with the ruling, says EU spokesman Jonathan Todd.

"The deadline is five weeks. If they don't comply, they'll have to pay the fine every day," Todd told a news conference.