Tech Features

Secret dinner and a deal in EU's Microsoft battle

Oct 22, 2007, 16:46 GMT

Brussels - After 10 years of legal wrangling, the EU's feud with Microsoft was settled over a secret dinner in a quiet Dutch restaurant, officials revealed on Monday.

'When the European Court's ruling was published (on September 17), Microsoft CEO Steve Ballmer and I got in touch. We met in a small restaurant - that's where it all started, nobody could find out where,' EU Competition Commissioner Neelie Kroes told journalists. 'I paid the bill!' the Dutch Commissioner added quickly.

The EU's decade-long legal dance with Microsoft has been carried out in a blaze of publicity. In March 2004, the Commission - the EU executive - fined the Seattle-based software giant 497 million euros (711 million dollars at current rates) for refusing to make key communication codes available to rival software makers.

That fine, the largest in EU history, was topped up by a further 280.5 million euros in December 2005, when the Commission ruled that Microsoft was not complying with its initial verdict.

And on September 17 this year, the European Court of First Instance (CFI) ruled that the Commission's initial decision had been justified. The ruling left Microsoft facing further non-compliance fines that could add up to over 1.5 billion euros.

But in the wake of the CFI's decision, the spotlight on Microsoft suddenly faded, with company officials and Commission personnel maintaining a discreet silence on their future intentions.

And while public attention turned to other matters, the leaders of the two sides met in a quiet restaurant in the Netherlands not far from Kroes' home, as the Commissioner revealed on Monday.

That initial intimate diner a deux led to 'almost daily contact' and 'highly constructive conversations' between the duo over the following three weeks, with the final contact made 'very early' on Monday morning, Kroes said.

Within hours of the last phone call, the Commission announced that Microsoft had finally decided to comply fully with its 2004 ruling on the publication of the key codes. As a result, 'as of today, the major issues concerning compliance have been resolved,' Kroes said.

Almost simultaneously, Microsoft announced that it would not challenge the CFI's ruling - leaving the Commission free to cash in the half-billion-euro fine of 2004, which had been blocked in a separate bank account while the court case unfolded. Two decisions on the case are still outstanding. Microsoft is currently involved in a court appeal against the EC's December 2005 fine of 280.5 million euros, and some sources have suggested that the firm might now decide to drop that appeal.

The same December 2005 ruling imposed further non-compliance fines of up to 500,000 euros per day until Microsoft satisfied EU rules - a sum later raised to 2 million, then 3 million euros a day.

The Commission is set to decide 'as soon as possible' on how much the sum should in fact be, officials said, with the total theoretically possible fine topping 1.5 billion euros.

Following the high-level talks between Kroes and Ballmer, observers suggest that the actual sum is likely to be substantially lower.

Whatever happens, Monday's decisions bring to a close a decade- long struggle, with Microsoft looking to restore cordial relations with the EU, and the Commission enjoying a massive boost to its prestige and budget.

No matter how much Kroes paid in her small Dutch restaurant, she is unlikely to complain about the final balance.