Microsoft staring at another fine mess

Microsoft now has less than two weeks to launch its defence against the latest antitrust charges filed by the European Commission, and there are increasing signs the world’s largest software group is growing desperate.

Unless Microsoft can persuade the regulator it has complied with the antitrust ruling issued by the Commission in March 2004, it faces fresh financial penalties worth up to €2m ($2.4m) a day.

The fines would be backdated to mid-December last year, and would be levied until Brussels is satisfied that Microsoft has fully complied with the ruling.

For a group as cash-rich as Microsoft, the fines would arguably not be the worst part of such a move.

But the reputational damage and the threat to its legal position are potentially serious. Microsoft would be the first company in the history of European antitrust enforcement to be punished for failing to comply with a ruling from Brussels.

Even worse, the fines would probably start being levied shortly before the European Union’s second-highest court stages its first hearing to decide Microsoft’s appeal against the 2004 decision.

The group would be forced to plead its case as a company branded for ignoring a ruling of the EU’s senior regulator - a severe handicap certain to be exploited mercilessly by the group’s rivals and the Commission itself.

In an attempt to fend off this menacing prospect, the group has fired off two salvos in the past week, that are clearly designed to turn the heat back on the Commission, while signalling that Microsoft is ready to comply.

First, it offered to license parts of the Windows source code to other companies, claiming that access to these basic programming instructions would allow rivals to develop server software that runs smoothly with Windows-driven computers and servers.

Under the terms of the Commission’s 2004 ruling, Microsoft was ordered to draw up and make available technical documentation on Windows to achieve that same effect.

But in December, the regulator dismissed the group’s efforts to date as “totally useless” - an assessment that led to the threat of new fines.

Microsoft believes that its source code offer - coupled with other concessions signalled - should put the regulator’s concerns at rest. But both the Commission and the group’s rivals were quick to cast doubt over the value of the offer.

They say Microsoft should simply do what it was told to do - provide complete and accurate technical documentation to ensure interoperability - and not engage in what some have dismissed as a PR stunt.

Separately, Microsoft also hopes to delay renewed Commission action by insisting the regulator respect its right to a defence and provide access to more of any incriminating material collected by Brussels.

A letter sent to the Commission on Monday says the group has been granted access to only 29 out of 100 relevant documents - of which 25 in any case relate to correspondence between the Commission and Microsoft itself.

As reported in the Financial Times on Thursday, the letter slams the Commission for “seriously prejudicing Microsoft’s rights of defence” - a strong accusation that drew an acerbic response from the regulator’s spokesman: “I can understand that Microsoft is not always necessarily happy with the decisions of the hearing officer [the official charged with ensuring due process in competition cases]. We don’t live in a perfect world,” he said yesterday.

[pls keep] A Microsoft spokesman said: “We have great respect for the Commission as a institution but we are very concerned about the lack of transparency in this procedure.”

Complaints that the Commission does not give the companies it investigates sufficient access to documents occur frequently - and any hopes that Microsoft’s move will win it more time appear a long shot.

But with the clock ticking mercilessly, Microsoft is clearly determined to throw all it can in the way of the Commission juggernaut.