EU Considers New Kind Of Antitrust Penalty For Microsoft

Microsoft may face a new kind of antitrust punishment from the European Union if the company, already hit by multi-million-dollar fines, continues to defy it, the bloc's top competition official hinted.

The EU's executive Commission has said Microsoft set unreasonably high prices to discourage would-be competitors from making server software. The company responded on Monday that it would request no oral hearing on the allegation, which could result in fines of up to 3 million euros ($4 million) daily.

Competition Commissioner Neelie Kroes -- referring to Microsoft -- said that when a company repeatedly failed to comply with Commission orders it might be time for a new tack.

"It could be reasonable to draw the conclusion that behavioural remedies are ineffective and that a structural remedy is warranted," she said in a transcript of remarks made last week and provided by her office on Monday.

In March 2004 the Commission fined Microsoft a record 497 million euros and ordered it to change its business practices, ruling the firm had failed to give information to other makers of small-business servers needed to compete with Microsoft.

Microsoft has said it would charge for interoperability information because the data was based on the company's own innovative work and protected by patents.

But the Commission charged in March this year that competitors gave away such software whether or not it was patented.

"The Commission's current view is that there is no significant innovation in these protocols," Kroes said in March.

Brad Smith, Microsoft's general counsel, said on Monday the firm needed "greater clarity on what prices the Commission wants us to charge, and we believe that is more likely to come from a constructive conversation than from a formal hearing".

A Commission spokesman said: "We have received the Microsoft reply to our statement of objections and the Commission will study it carefully."

Last week, Kroes told the American Bar Association in Washington: "In 50 years of EU antitrust policy we have never before encountered a company that has refused to comply with a Commission decision."

She said the possibility of structural remedies was specifically mentioned in European law.

At the request of the U.S. Justice Department a federal judge ordered Microsoft broken up in 2000, but his decision was later thrown out by an appeals court.

A Commission spokesman said in March that Microsoft's market share of small-business server software had grown to 75% while it defied the Commission.

Microsoft has appealed against the Commission's original 2004 decision and is awaiting a ruling by the European Union's second-highest court, the Court of First Instance in Luxembourg.