Microsoft To Appeal European Commission Fine

by Ulrika Lomas, for LawAndTax-News.com, Brussels

18 July 2006

After the European Commission fined Microsoft EUR280m last week, the company said it would appeal the decision, said the company's general counsel, Brad Smith.

The fine covered the period from last December to June 20 at the rate of EUR1.5m per day. Commissioner Neelie Kroes said that large quantities of documentation had been received after June 20 and that it wasn't possible to say yet whether the company remained in breach of the requirement for it to provide inter-operability information.

Said Mr Smith: "We do not believe any fine, let alone a fine of this magnitude, is appropriate given the lack of clarity in the commission's original decision and our good-faith efforts over the past two years. We will ask the European courts to determine whether our compliance efforts have been sufficient and whether the commission's unprecedented fine is justified."

He added that, while the company disagrees with the decision, it will remain focused on completing the required technical documentation and working with the Commission on a number of other initiatives. The company says it has 300 people working full time on the EU's demands.

The Commission found in March, 2004, that Microsoft had abused its dominant position under Article 82 EC, and required Microsoft to disclose complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers. Microsoft was fined EUR497m.

Microsoft's Irish subsidiary, the country's most profitable company, reported gross profits of EUR7.5bn in 2005 and paid tax of EUR300m. The company has located one of its international headquarters in Ireland, which has a tax rate of only 12.5%.

Speaking before the Senate Finance Committee last February, then US Treasury Secretary, John Snow confirmed that the government would be taking action to prevent US multinationals from reducing their tax bills by billions of dollars using subsidiaries located in low tax jurisdictions.

Under new competition law rules adopted recently, daily fines for competition law breaches can reach as high as EUR3m after July 1, 2006.

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