Microsoft facing EU fines

Software giant Microsoft is facing a heavy fine and swingeing penalties following the breakdown of talks with Brussels over anti-trust action.

European Competition Commissioner Mario Monti is now planning to unveil the draft EU competition ruling against the firm on Wednesday, 24 March.

Both Mr Monti and Microsoft chief Steve Ballmer agreed that commitment over future conduct was the sticking point.

Microsoft has already announced its intention to appeal against the ruling.

The decision to appeal means the five-year investigation still has some way to run.

For much of this week Mr Ballmer, Microsoft’s chief executive officer, has been negotiating with Mr Monti over the ruling.

The argument has centred around the bundling of software and services – in particular audio/video software – into the Windows operating system.

For Microsoft, such a practice is at the heart of its strategy of keeping its customers – which comprise the users of more than 9 out of every 10 PCs – buying and upgrading its products.

But the EU sees it as the actions of an “abusive monopolist”, putting obstacles in the way of customers looking elsewhere.

Many observers believe Microsoft will have to offer PC makers and sellers a stripped-down version of Windows without its A/V software.

That would allow its main competitors – RealNetworks’ Real Player and Apple’s Quicktime – a clearer shot at the market.

The firm is also likely to have to open up many more of the secrets of its operating system to rivals, to make sure their software can work successfully with Windows.

“In the end I had to… decide what was best for competition and consumers in Europe,” Mr Monti said.

Microsoft might have been prepared to allow its competitors an equal position on the desktop of Windows PCs.

But multiple versions of Windows are likely to have been a step too far.

And the EC’s determination to enforce limitations on future behaviour will have been the last straw for Mr Ballmer and chief legal counsel Brad Smith, also a party to the negotiations.

The two worked hard to ensure the settlement of a long-running US anti-trust case – reached in 2001 – included only the sketchiest of guarantees on future strategy.

But Mr Monti’s position is clear.

“It is essential to have a precedent which will establish clear principles for the future conduct of a company with such a strong dominant position in the market,” he said.

Earlier this week a European Union competition panel unanimously backed the Commission’s draft plan of action against Microsoft.