EU Warns That Vista May Mean More Fines for Microsoft

European Union regulators fines Redmond and warns that the company needs to make sure it doesn't get into the same trouble again.

Even as the European Union's antitrust division was delivering another blow to Microsoft Corp. in its current antitrust case, regulators warned that the company needs to make sure it doesn't get into the same trouble again.

EU Competition Commissioner Neelie Kroes said she had told the company to take care to avoid antitrust problems with its upcoming operating system, Windows Vista. Kroes said she has already told Microsoft that the "general principle" of the original March 2004 decision should be taken into account when deciding what to include in Vista.

Kroes' comments Wednesday came as the EU levied a second massive fine on Microsoft and threatened greater penalties in the future unless the world's largest software company obeys the 2004 antitrust order to share technical details of its Windows operating system with rivals.

Microsoft was fined 280.5 million euros ($357 million), on top of the record 497 million euros ($613 million) fine it paid in the original order. It also faces new penalties of 3 million euros ($3.82 million) a day beginning July 31.

Mark Ostrau, co-chair of the antitrust group with law firm Fenwick & West, said he saw the fines as a warning that Microsoft must comply now and behave with future releases.

"In some ways these fines are only partially about complying with the ... prior case, and half about sending a message to Microsoft that the European Commission is not going away," he said.

Microsoft General Counsel Brad Smith immediately disputed the fines, and said the Redmond, Wash.-based company would ask the EU's second-highest court, the Court of First Instance, if its compliance efforts have been sufficient. He claimed the EU had not been clear about its demands and how Microsoft should present the information.

But Smith also appeared eager to avoid another costly and damaging run-in with Vista, which after numerous delays is scheduled to be available to consumers in January.

The commission has said that it is concerned about Vista's Internet search capabilities and method of managing digital rights. Regulators also are worried about the implications for competitors of a new technology for saving documents that is similar to the Portable Document Format developed by Adobe Systems Inc.

Like PDF, Microsoft's technology, called XPS, would allow users to create and read documents that can be easily shared but not easily modified.

Smith said Microsoft had suggested various ways it could offer Vista in Europe, to address concerns about XPS. One option is to ship Vista without it, while another is to include ways for PC makers or others to either remove certain XPS utilities or make them invisible. Another option is to give Adobe the opportunity to ship its own software with Vista.

The Commission has so far not responded.

An Adobe spokeswoman did not immediately return a call seeking comment.

Microsoft already has said that it would offer the ability to save in either the PDF or XPS format as a free download for its forthcoming Office 2007 business software, instead of building those options into the system. That decision came after a spat with Adobe.

Microsoft doesn't expect any compliance efforts to further delay Vista's release, but it's seeking more guidance from the EU. The company wants to make sure it's taken the steps necessary to appease EU officials before it's too late, spokesman Jack Evans said Wednesday.

Ostrau said the EU would have to bring a separate case in order to formally take on Vista, but it would be a much simpler procedure because of the existing 2004 ruling.

The fines announced Wednesday come after the EU told Microsoft to supply "complete and accurate technical specifications" to developers, so they could make software for servers that help computers running Windows, printers and other devices on a network talk to each other. It accused Microsoft of using its monopoly position with Windows to elbow into the server software market.

Kroes said Microsoft's earlier efforts had not come even close to a readable manual developers could use. Her decision is based on reports from an independent monitor _ computer science professor Neil Barrett _ and other technical advisers.

They have had harsh words for Microsoft. In December, Barrett called the documentation "totally unfit" for its intended purpose.

In March, information technology consulting group TAEUS looked again at a revised document Microsoft had supplied. It also described the manual as "entirely inadequate," "devoted to obsolete functionality" and "self-contradictory."

But Smith said the EU had not been clear about its demands and how Microsoft should present the information.

"Before one imposes a fine of hundreds of millions of euros, I think that there's a responsibility the government has to be specific and concrete about what it wants someone to do," he told reporters in a conference call. "The decision did not do that."

Kroes said the company's recent work to improve the documentation was "extremely good." But that didn't keep regulators from fining the company 1.5 million euros ($1.91 million) a day from a Dec. 15 deadline to June 20, when it decided that Microsoft was still violating EU law.

It is the first time the EU has fined a company for not obeying an earlier order. Microsoft has three months to pay Wednesday's fine.

Any decision on new fines will be made in the fall.


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