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Last Updated: Wednesday, 24 March, 2004, 08:04 GMT
Microsoft faces 'record EU fine'
Microsoft co-founder Bill Gates
Microsoft is expected to appeal against the EU's decision
Software giant Microsoft looks set to face the biggest fine in EU history for abusing its monopoly position.

The European competition commissioner is set to reveal on Wednesday what penalties he is imposing on Microsoft.

But EU member states met to discuss his proposals on Monday, after which leaks swirled round Brussels that it would be nearly 500m euros ($616m; 334m).

Microsoft has a cash pile of more than $50bn, so even a fine on this scale is unlikely to hurt it commercially.

Microsoft has also made clear that it intends to appeal against the ruling so the case, which has already dragged on for five years, could still be a long way from a resolution.

It claims that it should not be fined at all because it did not know its behaviour would breach EU law.

At the end of trading in New York on 23 March, Microsoft shares were down 1.4% at $24.15.

Rumours converge

The exact details of what the EU has in store for Microsoft will become clear by lunchtime on 24 March.

Mario Monti
It is essential to have a precedent which will establish clear principles for the future conduct of a company with such a strong dominant position
Mario Monti, EU competition commissioner

The full 20-member European Commission will meet at 0800 GMT to discuss Competition Commissioner Mario Monti's plans.

Mr Monti himself is expected to give a press conference some time after 1115 GMT.

As well as fining Microsoft, Mr Monti is expected to set limits on its practice of bundling software and services with its Windows operating system.

Bundling is a key part of the software firm's commercial strategy.

Demands

Mr Monti is thought likely to demand that Microsoft offers a version of Windows that comes without the company's own media player.

His proposals were put to a meeting of representatives of EU's 15 members on Monday.

Leaks circulating in Brussels after that meeting suggested the fine would be about 500m euros.

EU COMPETITION FINES
Hoffman-La Roche (2001, vitamins cartel): 462m euros
BASF (2001, vitamins cartel): 296m euros
Lafarge (2002, plasterboard cartel): 250m euros
Arjo Wiggins (2001, paper cartel): 184m euros
Nintendo (2002, restrictive distribution practices): 149m euros
Source: EU
If the leaks are true, the fine will top the EU's previous record of 462m euros. That penalty was imposed on pharmaceutical group Roche after a scandal involving price fixing in the vitamin pills market.

EU wants more open Windows

Last-ditch talks to agree a settlement between Mr Monti and Microsoft chief executive Steve Ballmer broke down last week.

The sticking point was thought to be Mr Monti's proposals for restrictions on Microsoft's future practices.

Following the talks, Mr Monti said: "It is essential to have a precedent which will establish clear principles for the future conduct of a company with such a strong dominant position."

The EU's investigation has found Microsoft to be an "abusive monopolist" which has skewed the market for audiovisual software to the detriment of its rivals.

Microsoft's Windows operating system sits on 90% of the world's PCs, so its decisions about what other software to include with Windows are hugely influential.

Reports say Microsoft will be forced to share proprietary details of its Windows software with rivals, making it easier for them to tailor their products to run on it.

Mr Monti is also expected to demand that Microsoft provide a stripped-down version of its Windows system for the same reason.


WATCH AND LISTEN
The BBC's Brian Milligan
"Microsoft is certain to appeal against the decision"



SEE ALSO:
Microsoft's European showdown
23 Mar 04  |  Business
Microsoft facing competition fine
18 Mar 04  |  Business
Microsoft in last-minute EU talks
17 Mar 04  |  Business
Panel backs EU Microsoft ruling
15 Mar 04  |  Business
Microsoft ends 'unfair' contract
27 Feb 04  |  Business
Microsoft's extensive legal history
26 Feb 04  |  Business
EU's mind 'made up' on Microsoft
27 Jan 04  |  Business
Microsoft faces new probe
07 Jul 03  |  Business


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