Brussels, 01/03/2007 (Agence Europe) - On Thursday 1 March, the European Commission sent a statement of objections to Microsoft reproaching it for not complying with its decision of March 2004 (EUROPE 8673). “This is the first time in 50 years that a company refuses to comply with European competition rules. It is to be regretted”, deplored Jonathan Todd, spokesman for Competition Commissioner Neelie Kroes. According to the Commission's preliminary analysis, the pricing of licence agreements applied by the IT leader worldwide is not proportional to their very low innovative content, contrary to the pricing principles concluded between Microsoft and the Commission in May 2005. Microsoft has four weeks in which to respond, and the Commission may impose a daily fine if Microsoft's response is not forthcoming or if it is found to be unsatisfactory. This decision only covers the pricing chapter of negotiations. The issue of whether the interoperability information is complete and accurate is still under consideration by the Commission.
With its decision of 10 November 2005, the Commission had threatened Microsoft with daily fines of up to €2 million if it did not come into line with the obligation by 15 December of the same year, not only to provide complete and precise information on interoperability but also to demand only “reasonable” prices for access to this interoperability information. On 31 May 2005, Microsoft and the Commission agreed on the definition of a “reasonable” price in this context, a definition on which the Commission has based its recent analysis. These “pricing principles” provide for: - Microsoft pricing to allow commercially viable implementation by the person buying the licence; for the price not to exceed a nominal price except on innovative protocol technologies, and for the prices for such innovation to correspond to the market value of comparable technologies. According to the analysis carried out, both licences proposed (one of which confers the licence on the buyer for patented technologies) contain virtually no innovation and the little that they do contain is for the most part available on the market at very low prices, if not free of charge. This constitutes infringement to the 2005 decision and could mean that Microsoft will receive fines of a further half a million euros daily in addition to the fines already imposed for the period 16/12/2005 to 30/07/2006, and in addition to the new fines at the maximum of €3 million per day as of 1/08/2006.
Microsoft does not agree with the Commission's analysis. In a press release it affirms that the Commission gives too much importance to innovation in pricing - and also, that the protocols concerned would contain 36 patents, with another 37 pending. It also cites a study by PricewaterhouseCoopers that estimates Microsoft prices are 30% below average. Microsoft also finds it unreasonable of the Commission to demand that any software should be patentable before being able to sell for profit. Brad Smith, Senior Vice-President and Advisor told the press that they have had agreements on 5 continents over the past 15 years but that they have “never seen anything like it”.
Be this as it may, the fines and penalties inflicted on Microsoft in this affair do not seem to hamper market development or its cooperation with the Commission on other information society projects. The sums are duly placed on blocked accounts and business continues as usual. A spokesperson for DG Competition said “we are limited in the penalties that we can fix”. Perhaps such limits deprive sanctions of having a deterrent effect when it concerns such an important enterprise? (cd)