Vol. 4 Num 293 Wed. March 24, 2004  

Microsoft faces record anti-trust fine as EU verdict nears

US software giant Microsoft faces a record fine of nearly 500 million euros and hard-hitting changes to its flagship product when European regulators announce their verdict to a five-year probe Wednesday.

The European Union's competition commissioner, Mario Monti, on Monday won the backing of EU member states to fine Bill Gates' titan 497 million euros (613 million dollars) for breaking EU anti-trust law, sources said.

The unprecedented size of the financial penalty might not hurt Microsoft, which has cash reserves of some 53 billion dollars.

But enforced changes to its Windows operating system, which powers nine out of 10 of all personal computers, will.

Monti, provided his proposals are endorsed by the rest of the commission on Wednesday, will order the company to detach its multimedia program Media Player from Windows to give rival products a more level playing field in Europe.

The Seattle-based company, denying that it abuses its overwhelming dominance to illegally crush competitors, has already vowed to appeal the verdict to the European Court of Justice.

After largely settling its anti-trust problems at home through a hotly disputed deal with the US Justice Department, Microsoft sees no reason why it should undergo a drastic product overhaul in Europe.

Being forced to unbundle Media Player would be the thin end of the wedge for a company that has made offering consumers an all-in-one suite of applications the centrepiece of its hugely successful business strategy.

Microsoft spokesman Lou Gellos said the only stumbling block in last-ditch settlement talks last week between EU regulators and Microsoft was "our capacity to innovate" with applications like Media Player.

"It's very difficult for Microsoft to see how a fine of this magnitude could be warranted under these circumstances," he said, reiterating the threat to appeal, which would suspend the EU sanctions.

"It's certainly unwarranted because we think it comes only from the inability to reach a settlement on one issue after we essentially agreed on every other issue."

To date, the biggest fine levied by the commission on a company for breaking competition rules was a 462-million-euro penalty against the Swiss chemical firm Hoffman-Laroche in 2001 for forming part of a vitamins cartel.

And the Microsoft penalty will dwarf the previous biggest fine for abuse of dominant market position -- 75 million euros -- levied in 1991 against Swedish packaging firm Tetra Pak.