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Last Updated: Thursday, 25 March, 2004, 00:26 GMT
Broad approval for Microsoft fine
Bill Gates
Microsoft says it has acted properly
Consumer groups have applauded the European Commission's decision to hit Microsoft with a 497m euro fine and force it to disclose software secrets.

Rival software makers including Realnetworks and Sun Microsystems, have also been quick to back the punishment.

The move, they said, was likely to lead to lower prices, increased competition and more variety for consumers.

But Microsoft has said it will appeal against the ruling that it abused its dominant market position.

Fight coming

According to the company's main lawyer, Brad Smith, "the Commission's decision would actually reduce consumer choice and hurt European software developers".

Mario Monti
Today's decision restores the conditions for fair competition
Mario Monti, EU Competition Commissioner

Referring to the planned appeal, Mr Smith said; "the Commission has the first word, but the European courts have the final word."

Analysts and industry executives said it was less about the 497m euros ($613m; 331m) Microsoft has to pay and more about the fact it will have to hand over key elements of its programming.

Microsoft, whose Windows software sits on 90% of the world's PCs, has a cash pile of more than $50bn.

Lee Patch, a vice president of legal affairs at Sun Microsystems, explained that after the transfer of knowledge, non-Microsoft programs would work better and more smoothly with Windows.

"The Commission's decision seeks to create a level playing field," he said, adding that products could then "compete on merits," rather than compatibility.

High Street

Shoppers also are set to feel the benefits in their wallets, with Jim Murray, director of the consumer interest group BEUC, predicting that the cost of Microsoft's operating system may now decline.

"The logic of the Commission is that this ruling should make Windows cheaper, because it will bring more competition," Mr Murray said.

Dave Stewart, one of Realnetworks' lawyers, said in an interview with Reuters that the ruling would probably allow his client to increase its market share.

"Manufacturers will take advantage of their freedom," Mr Stewart said.

"For the first time in five years they are not going to be forced to include Windows MediaPlayer."

Main points

Microsoft, however, has not been a lone voice complaining that the ruling will stunt development and innovation.

Industry experts say that the non-financial penalties are likely to hurt Microsoft by opening it to further challenges and altering the regulatory environment it operates in.

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

Mr Monti has ordered Microsoft to reveal details of its Windows software codes within 120 days, to make it easier for rivals to design compatible products.

Microsoft must offer a stripped-down version of its Windows operating system minus the firm's MediaPlayer audiovisual software within 90 days.

Microsoft will still be allowed to sell Windows with Media Player bundled in.

Announcing the penalties, Mr Monti said they restored the conditions for fair competition in the software market.

Industry damage

Microsoft chief executive Steve Ballmer said that the settlement the company proposed last week, which would have let it offer rival products alongside its own, "would have offered far more choices and benefits to consumers".

Jonathan Zuck, president for Competitive Technology, agreed.

"The Commission may be trying to punish Microsoft, but its proposals reserve the harshest effects for consumers and small technology companies," he warned.

Steve Ballmer
Microsoft CEO Steve Ballmer reckons the EC missed the boat

"The Commission plans to regulate the future of software development and it will ultimately lead to less innovation and higher software costs for everyone."

Hugo Lueders, European director at the Computing Technology Industry Association, was equally forthright.

The ruling "signals an ominous change for the global information and communications technology industry," he said.

"Rather than encouraging companies to provide better and less expensive computing technology, it sends a message that companies who compete aggressively and give computers better products will be punished."

The BBC's Rory Cellan-Jones
"This is a high stakes battle"

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