- The Washington Times - Thursday, March 18, 2004

BRUSSELS (AP) — The European Union announced its intention yesterday to sanction Microsoft Corp. after the software giant balked at demands that could have prevented it from adding new features to future versions of Windows — a restriction it avoided in the landmark U.S. antitrust case.

Frenzied settlement talks that accelerated this week with the arrival of Microsoft Chief Executive Steve Ballmer in Brussels collapsed over EU insistence on a broad deal in exchange for allowing Microsoft to avoid being found guilty of monopolistic behavior.

EU Competition Commissioner Mario Monti said he now would proceed with a precedent-setting ruling against the world’s largest software company on Wednesday. The European Union also plans to hit Microsoft with a fine expected to reach hundreds of millions of dollars.

“We made substantial progress toward resolving the problems that had arisen in the past, but we were unable to agree on commitments for future conduct,” Mr. Monti said. “It was impossible to achieve a satisfactory result in terms of setting a precedent.”

Hours later, Mr. Ballmer said he believed the issues in the current case — involving digital media players and the server software market — had been resolved.

“But we were unable to agree on principles for new issues that could arise in the future,” he said in a statement.

Microsoft attorneys said they would appeal any negative decision to European courts.

An EU order could force Microsoft to make costly changes in its software — potentially on a global scale — in a matter of months unless it wins a suspension from the court pending appeal, which can take years.

Mr. Monti will present the proposed fine Monday to an advisory committee of national regulators before going to the full European Commission, the European Union’s executive branch, on Wednesday for a final decision.

After winning unanimous backing from the 15 EU governments last week, the ruling is expected to pass easily.

Microsoft is accused of unfairly grabbing market share from rival companies by bundling its own Media Player with Windows — the operating system in nearly every personal computer worldwide.

Microsoft contends that benefits consumers, but rivals claim it is unfair competition that stifles innovation and aims to drive them out of business.

The charge was similar to the 1990s Internet browser war in the United States, where Microsoft was found guilty of using illegal means to protect its Windows monopoly. But a 2001 settlement with the Bush administration allowed it to continue integrating its Internet Explorer with Windows.

Sources familiar with the case say the European Union’s draft ruling finds Microsoft guilty of monopolistic behavior and goes beyond the U.S. remedies.

The European Union is demanding that Microsoft offer computer makers in Europe a discounted version of Windows without Media Player so that rivals such as RealNetworks Inc. and Apple Computer Inc. have a better shot at reaching consumers.

In addition, the draft is expected to require the company to release more underlying Windows code so rival server software companies including Sun Microsystems Inc. can interoperate better with computers running Windows.

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