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EU Rejects Microsoft's Bid to Stop Sanctions

March 19, 2004|Jube Shiver Jr. | Times Staff Writer

WASHINGTON — European officials Thursday rebuffed Microsoft Corp.'s bid to avoid restrictions on its business practices and a hefty fine.

The company vowed to continue seeking a deal until a final court ruling ended the landmark case. That could be years away.

Although European Competition Commissioner Mario Monti is scheduled to announce sanctions against the software maker Wednesday, Microsoft can appeal the order to Europe's Court of First Instance in Luxembourg -- a process that can take two to three years.

In the meantime, the sanctions would remain in place. Microsoft could be ordered to remove its multimedia software from some versions of its Windows operating system, to share more details about Windows with competitors and to pay hundreds of millions of dollars in fines.

Such penalties would be the stiffest so far against Microsoft, which has spent years fighting charges that it uses its dominance in operating systems to crush competitors. The importance of the European case was highlighted this week when Microsoft Chief Executive Steve Ballmer flew to Brussels to negotiate personally with Monti.

"A settlement to the Microsoft case has not been possible," Monti said Thursday in Brussels. "In the end, I had to decide what was best for competition and consumers in Europe."

Ballmer said he held out hope that a settlement was still within reach.

"We were unable to agree on principles for new issues that could arise in the future," he said before leaving Brussels to return to the U.S.

"I hope that perhaps we can still settle this case at a later stage."

Microsoft has been negotiating for months to settle the allegations that it violated European Union competition rules by bundling its digital media player with Windows and by not disclosing enough technical details to enable other companies to make their products work better with the operating system that powers most of the world's personal computers.

Antitrust officials from the EU's 15 member countries have given their unanimous backing to a proposal that would fine Microsoft and force it to either remove its Media Player from Windows in the European market or include media players from other companies.

The commission can impose a fine of up to 10% of Microsoft's global sales, which totaled $32.2 billion in its last fiscal year. However, such fines rarely exceed 1%, even in price-fixing cases. And analysts at Merrill Lynch speculated Thursday that the effect of any fine against Microsoft -- which has $53 billion in cash -- would be "relatively insignificant."

EU officials are also considering forcing Microsoft to share more technical details of its Windows software with other developers. But legal experts said the EU was concerned such a requirement might be difficult to justify in a region that has traditionally given intellectual property owners strong legal protections.

Monti's statement can't be viewed as "a real positive" for Microsoft, "but you can't rule out the possibility that it is a negotiating tactic -- that this thing can still be resolved before any official announcement next Wednesday," said Charles Di Bona, an analyst the Wall Street brokerage firm Sanford C. Bernstein, whose parent firm, Alliance Capital, holds some Microsoft stock.

Microsoft's rivals cheered Monti's statement as an indication that antitrust enforcers in Europe were prepared to take a tougher stance against the software giant than their counterparts in the United States, who settled their case against the software giant in 2002.

"We've read the commission's statement and strongly support a decision that will give PC makers, enterprises and consumers a choice of media players," said Dave Stewart, deputy general counsel of RealNetworks Inc., which markets competing media-player software. "It's time to restore fair competition to digital media through an effective remedy."

Microsoft's shares fell 24 cents to $24.89 on Nasdaq.

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