Microsoft: €497 million EU fine too big

Microsoft will be fined #497 million by the European Commission on Wednesday for abusing its monopoly in computer operating systems, a person close to the company says.

Microsoft will be fined €497 million by the European Commission on Wednesday for abusing its monopoly in computer operating systems, a person close to the company says.

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

On Tuesday (Belgium time) 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, shortly before Mario Monti, competition commissioner, holds 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 person says, adding ''Microsoft could argue that it didn't know until now that its behaviour broke the rules.''

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

The commission is expected to rule on Wednesday that Microsoft abused the monopoly position of its Windows operating system twice. By withholding vital information about Windows from makers of software for servers, the firm gained an unfair advantage over them in the market for server software; 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 in these markets, requiring Microsoft to sell two versions of Windows to PC makers in Europe, one of them with Media Player stripped out.

It would also have to share more secret Windows code to allow rival server software makers to compete with Microsoft server software more fairly, 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, because the company has over $US50 billion in cash reserves and has already set some of that aside for covering legal costs.

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

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