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Neelie Kroes Statement on Microsoft Fine, Q & A - transcript
Wednesday, February 27 2008 @ 02:35 PM EST

Sean Daly took the time to transcribe the Neelie Kroes statement to the press and the Q & A afterward, from the video regarding the Microsoft fine, announced earlier today. Thank you, Sean. However, for anything that matters, go by the video. This is not an official transcript, and although we strive for accuracy, we can't guarantee it. If anyone notices any mistakes, please let me know, so we can perfect it. It is absolutely fascinating. My favorite part is her promise that consumers can rely upon it that they will have a choice.


Jonathan Todd: Good morning ladies and gentlemen. Competition Commissioner Neelie Kroes is here to talk to you about the decision taken this morning by the Commission on Microsoft. After her introductory remarks, we'd of course be very pleased to take your questions.


Neelie Kroes: Good morning everybody.

Today the European Commission has imposed a substantial fine -- to be precise 899 million euros -- on Microsoft for its non-compliance up until the 22nd October of 2007 with its obligations under the Commission's March 2004 Decision, as you are aware, to provide interoperability information on reasonable terms.

Today's decision finds that, prior to the 22nd of October 2007, Microsoft charged unreasonable prices for access to indispensable interoperability information.

In plain English, this is to say that Microsoft continued to abuse its powerful market position [?] our March 2004 decision requiring it to change that practice. Microsoft continued to stifle innovation. How? By charging other companies prohibitive royalty rates for the essential information they needed to offer software products to computer users around the world. Well, charging such an unreasonable prices effectively rendered the offer of information pointless. And Microsoft's behavior did not just harm a few individuals or a handful of big companies; directly and indirectly, this had negative effects on millions of offices in companies and governments around the world.

By the way, it gives me no pleasure to be here again announcing such a fine, nor to see that a company flouted the law when it had many opportunities to choose other courses of action. But given the nature of Microsoft's non-compliance, considering both its effects and its duration, today's fine is proportionate and is necessary.

There are lessons that I hope Microsoft and any other company contemplating similar illegal action, will learn.

Talk, as you know, is cheap; flouting the rules is expensive, so to say.

We don't want talk and promises, we want compliance.

If you flout the rules you will be caught, and it will cost you dear.

This is by the way the third time in four years that we have had to impose fines or penalty payments on Microsoft. The first fine as you remember was for the abuse itself, everything up until March 2004. Then, the Commission had to impose a penalty payment in July 2006 for the non-delivery of complete and accurate interoperability information. And that was the first time that a penalty payment for non-compliance with a Commission decision had been necessary in fifty years of EC Competition Law.

And finally today's penalty payment for unreasonable royalty rates up until October 2007. That the Commission has been forced to levy these three fines reflects a clear disregard [by] Microsoft of its legal obligations.

The Commission's fine is a reasonable response to a series of quite unreasonable actions, so to say. Microsoft has gone from insisting on charging a 2.98% royalty for non-patented interoperability information to charging a flat fee of 10,000 euros for the same information.

Finally, after three years of illegal behavior, it appears that Microsoft has come into compliance with the 2004 decision.

Today's decision and penalty payment are about the 2004 Decision only and are not about any of Microsoft's other business practices. And I must stress, ladies and gentlemen, that distinction in the clearest possible terms. And you will of course be aware that the Commission opened two antitrust inquiries in January looking at several of Microsoft's other practices. And as you are aware one concerns interoperability information across a broad range of products, including Microsoft's Office suite and a number of its server products. And the other concerns tying of Internet Explorer and other separate software products with the Microsoft PC operating system.

Those investigations are separate and continuing, and I can offer no comment until the investigation is complete. But you are not expecting any comment on that one.

As always, we will take into account any changes that Microsoft makes to its business practices that are relevant to those investigations.

We take positive changes to business practices very seriously.

But again, and I stress that a press release in itself, such as that issued by Microsoft last week on interoperability principles, does not necessarily equal a change in a business practice.

And if change is needed -- and as I say, I have reached no conclusion on that -- then the change will need to be in the market, not in the rhetoric. We do have some experience on that.

To finish, I think it is important to share a little insight into our consistent approach to illegal behavior. It's not my job to tell people or to tell companies what to buy, but it is my job to ensure they have a choice about what they can buy. Competition policy is about making sure that people and companies have the right to choose. And when people and companies are given that right to choose, then markets deliver so much more -- and that is why I am passionate about making markets work better.

And today's decision sends, again, a strong signal that consumers can expect choice in Europe and can expect the European Commission to fight for their right to choice.

Thank you.


Jonathan Todd: Thank you, Commissioner. We'll be taking questions on this decision of this morning.


Q: Commissioner, you said yourself that the fine is quite substantial, it's nearly at twice as high as the fine in the procedure itself. Could you please elaborate on how the fine was calculated? Did it depend upon the time between the second fine and the third fine, or is that completely independent of that?


Neelie Kroes: [The] answer is yes, and if you take into account 899 million euros, and if you take into account 488 days that this was done, then it's not that difficult to make your calculation. By the way, I still think that we made a very reasonable amount of money out of this penalty. It is proportionate and I think that taking into account what we did, it's still the highest, yes, but it is -- we could have done much higher -- we could have done, and that is perhaps interesting -- we could have gone as far as 1.5 billion, so to say. So the maximum amount is higher than what we did at the end of the day. So, reasonable, but sticking to our line, they should behave like they have to.


Q: Fine on top of another fine, is there any point in these figures? Are all these fines going to make any change to things for consumers?


Neelie Kroes: In the positive sense, because fines are not intended to be at the service of taxpayers. You know that the total quantity applies with these fines and penalty payments. Ultimately, they go into a fund whereby taxpayers pay less to Europe. No, this is a signal whereby we make it very clear that it is unacceptable if you don't abide by the rules, just as in traffic. If you don't stick to the rules in traffic, then you get a fine. It's precisely the same for companies, and by repeating, re-offending, we make it known and we take the duration into account as well. I'm convinced that ultimately, it is in the interest of the consumer that companies must respect our rules and list of conditions and conduct. Then there's better choice, better quality for everyone. Thank you.


Q: Madame Commissioner, could you remind us of the total amount of all the fines that have been issued against Microsoft and now if they've been paid? [also asked an unrelated question]


Neelie Kroes: Thank you for your question. The total amount that Microsoft owes us, has to pay us, is 1.676700 billion euros. So nearly 1.7 billion euros, so to say. So those are three fines together. [also response to unrelated question]


Q: Yeah, could I just ask, you said that you could have fined them up to 1.5 billion? Was that the 10% of relevant turnover we're talking about, or -- ? I mean, what proportion of turnover -- somebody's shaking their head, so clearly not. I mean, how is it calculated? In other words, what I'm trying to get at is, how is it calculated? And is it related to turnover or profits or what? And the other thing is, that given all these signals which they've been sending you in your pleasant conversations you've had with Steve Ballmer in Rotterdam, in restaurants near Rotterdam, does it not seem to the outside world to be rather vindictive, although it's as you've given -- you've taken no pleasure in imposing the fine?


Neelie Kroes: Well, that is my general answer to every fine I have to come to, that it's never pleasure. For me, the best day in office will be when there are zero fines, so to say. For that -- but if we are doing the job properly, and that having been said, we are doing the job properly and all those in the outside world are behaving. But I think that I need more than one term in office to get to that point, so to say. And I'm not believing that -- and even with two terms in office, I am nearly sure that that won't be the case. Having said that, of course it is always our intention, whatever company, whatever nationality, whatever member state is involved in that operation, to come to a point that it's clear-cut for the company to behave and to follow the rules and regulations, and that at the end of the day, deserve that consumers issue.

What about the contacts with the CEO, and by the way, of course the contacts with the organization of Microsoft and DG Competition? It is all to try to get a solution in which that not behaving conformed to the rules and regulations and the judgment of the court, so to say, that that will be translated into a better behaving and in a better position for innovative actions from also the competitors and for more diversity in the sector. That having been said, if the maximum amount that I was mentioning of the periodic penalty payments could have theoretically been fixed at 1.5 billion [euros], the actual fixed amount is just shy. It's 60%. Nothing to do with whatever contact and so on, it has to do with the past, taking into account the period, so the number of days it has to do with the different phases in which they sometimes were moving a bit, and this is at the end of the day the final account we came to. And it's perhaps useful to point out that the last Article 24 decision in July 2006 for Microsoft's failure to provide complete and accurate specifications imposed a much larger share of the possible maximum. At that time, it was 75%. But, again, I think this is proportionate, it's reasonable, and it should be a signal to the outside world and especially a signal to Microsoft that we stick to our line.


Q: Commissioner, talking about the size of the fine, you said that the maximum possible fine would have been 1.5 billion euros. I'm just intrigued, given the size of Microsoft, given the length of time, given the fact that it's a repeat fine, why did you decide to go for less than the full amount? I mean, it's not as if Microsoft can't afford it. So why did you not go for the full amount? Why did you just go for the 60%?


Neelie Kroes: That, by the way, may never, ever be a line: Can someone afford, yes or no, is someone rich, yes or no. It is all in a fair but indeed, a way that you can defend the end of the amount also to the outside world. And rightly said by you, they are not a company that is in bad shape so to say. But that is exactly why we are interested in the company itself, because they have to perform like the other ones have to perform and taking into account that their own revenue, by the way, in the market is over 3 billion euros per year in this continent, then I think this is absolutely reasonable and you should take into account that the sky is not the limit for fines, it is just to be explained that we are reasonable and they have to be reasonable on their terms.


Q: You referred to Microsoft's announcement last week saying that the press communique was not sufficient, that there would have to be fundamental changes. Are you still skeptical about that announcement? And the announcement was made when you were discussing these fines today. Do you think that Microsoft went too far in their announcement?


Neelie Kroes: Well, I pretend to be not naive and I am not in the mood to accept when someone is mentioning that, talking about interoperability, the policy will be changed. First, show me. And then, I am willing and hopefully able to say that is in line with what we are asking for. By the way, that communication was not about tying, and as you are aware, we do have two big issues in our discussion with Microsoft. So talk is cheap -- and I was already mentioning that -- let's wait and let's find the reality in this case. And it's not the first moment that they were announcing this. We do have a couple of experiences. I even can remember four times that you should -- if you were naive -- should have thought over that everything was fixed but it didn't seem to be reality. So hopefully, this will be the fifth time and that will be the case but they have to deliver and to implement.


[unrelated question and answer]


Neelie Kroes Statement on Microsoft Fine, Q & A - transcript | 167 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Corrections Here
Authored by: FrankH on Wednesday, February 27 2008 @ 02:40 PM EST
Indicate the error in the title of your thread.

All right now, baby it's all right now.

[ Reply to This | # ]

Off topic
Authored by: FrankH on Wednesday, February 27 2008 @ 02:42 PM EST
Please make clickable links or lickable clinks. Your choice.

All right now, baby it's all right now.

[ Reply to This | # ]

News Picks
Authored by: FrankH on Wednesday, February 27 2008 @ 02:46 PM EST
Please make your thread title match the News Pick title.

All right now, baby it's all right now.

[ Reply to This | # ]

Neelie Kroes Statement on Microsoft Fine, Q & A - transcript
Authored by: PolR on Wednesday, February 27 2008 @ 03:11 PM EST
The tone of Mrs Kroes denotes a mixture of impatience and strong skepticism. In
the US they would say she is from Missouri. She is clearly letting Microsoft
know their karma isn't good at all.

I don't know what are the implications on their patent FUD and GPL exclusion
games, but I suspect this could be another antitrust battle that may erupt
anytime from now on.

[ Reply to This | # ]

Who's gonna make us?
Authored by: CustomDesigned on Wednesday, February 27 2008 @ 03:20 PM EST
Apparently, Microsoft still hasn't paid the fines dues since 2004. Why should
they ever pay? What's the EU going to do? Ban all Microsoft imports? That
would cause economic havoc. I can see Microsoft not paying the fine for
decades. The only effective action I can see for the EU is start imposing MS
duties with wide publicity, and increase the duties every year until the fine is
paid (effectively a gradual and partial ban). But that probably conflicts with
trade agreements with the US.

[ Reply to This | # ]

Neelie Kroes is too reasonable
Authored by: hga on Wednesday, February 27 2008 @ 03:47 PM EST

899 or 1.5 million Euros, it doesn't particularly matter. For Microsoft, that's "a cost of doing business", a medium sized ouch at worst.

I'm from Missouri myself, and a saying about Missouri mules applies here: "First you have to get the mule's attention." If the EU wants to see a change in Microsoft's behavior resulting from EU action (it might happen for other reasons), they are going to have to do something, say, 10 times as severe.

Not this sort of being "reasonable". I think she still doesn't really grok what she's dealing with (although her hands may be tied due to the severe and deserved blowback from the EU's nixing of the GE-Honeywell deal).

[ Reply to This | # ]

"That, by the way, may never, ever be a line"
Authored by: Anonymous on Wednesday, February 27 2008 @ 03:54 PM EST
"That, by the way, may never, ever be a line"
I do not get that.
Fines are there to be a sort of punishment.
If fines are always the same amount independent of the wealth of the
"finee" then how can it be a punishment for rich people / companies.
If you can very well afford a fine then it just an expense or maybe not even

[ Reply to This | # ]

1.67 Billion Euros Currently Outstanding Fines
Authored by: Anonymous on Wednesday, February 27 2008 @ 05:39 PM EST

At the current rate, that equates to $2.5 Billion US. Even with "cash and short-term investments" that total just over $21 Billion US that has got to hurt.

The article mentions market revenue of "over 3 Billion". That doesn't mean MS has a profit of that amount, just revenues to that amount.

One would think a "reasonable" interest would be charged for the outstanding fine as time goes on and the fine is left unpaid.

With all the above, in a sense:

    Ouch Time!


[ Reply to This | # ]

Authored by: E-man on Wednesday, February 27 2008 @ 06:02 PM EST
I'm wondering about the timing of this. Remember how Microsoft gave its latest
pledge about how nice they were going to play just a few days before the BRM.
Immediately afterwards (they were told about Microsoft's announcement in
advance), the EC issued a statement about how they've heard all that before and
talk is cheap and they were going to look at Microsoft's actions instead.

Then, today, they cranked up the volume a little more. They are basically
saying: We just had to fine Microsoft again because they still weren't playing
by the rules. Oh, by the way, we've still got a couple of investigations going
on, so this probably isn't the end of it.

I realize this is Europe, not Australia, but I can't help but thinking of
Crocodile Dundee: "That's not a knife. THIS is a knife." Is as if the
EC is saying to MS "That's not PR. THIS is PR". I'm pretty sure that
any warm fuzzies that were generated by Microsoft's announcement have pretty
much worn off by now. Those attending the BRM (particularly the European
delegates) have been reminded what their responsibilities are and that they are
dealing with a company that doesn't seem to respect the law.

I think that may be a bigger deal than the amount of the fine. I probably am
over-simplifying it somewhat. I'm sure the games that MS played in the makeup of
the MBs played a role in motivating the EC, too.

BTW, I'm not saying that the EC fined MS because of anything other than the
reasons given by the EC. I'm only speculating about the timing of the
announcement of it and the way they announced it.

[ Reply to This | # ]

This is just an opening salvo
Authored by: Anonymous on Wednesday, February 27 2008 @ 06:07 PM EST
Today's decision and penalty payment are about the 2004 Decision only and are not about any of Microsoft's other business practices. And I must stress, ladies and gentlemen, that distinction in the clearest possible terms. And you will of course be aware that the Commission opened two antitrust inquiries in January looking at several of Microsoft's other practices.
That seems plain English to me. I hope it was heard as plain English in Redmond. 1.7B today, another 1B before year's end, it's enough to start a CFO throwing chairs...

[ Reply to This | # ]

Microsoft too big?
Authored by: Anonymous on Wednesday, February 27 2008 @ 07:57 PM EST
I always liked a line Sam Shepard uses in "Roadhouse"...

Patrick Swayze: Be careful, some of those guys are pretty big.

Sam Shepard: That's ok, I ain't never seen anyone so big that when you break
their kneecap they don't fall down.

I'm betting Neelie Kroes knows right where Microsoft's knees are...

[ Reply to This | # ]

Q: How were the fines calculated?
Authored by: zr on Wednesday, February 27 2008 @ 08:01 PM EST
A. I'm a politician so I shall be evasive and not answer your question. However
you will have read today in the press about the European Parliament attempting
to hide a recent report on corruption. The Commission is no different although
(laughs) we are better at keeping it under wraps of course. So you will
understand that our gravy train doen't come cheap and a billion euros here and
there from Microsoft helps reduce the costs of our lifestyle to the European
taxpayer so a win-win for us and them.


Good that pressure is being put on Microsoft monopolistic practices but don't
let that blind you to the corrupt and greedy political system that rules the

Don't follow leaders, watch the parkin' meters.

[ Reply to This | # ]

Neelie Kroes For President!
Authored by: Anonymous on Wednesday, February 27 2008 @ 09:32 PM EST
Now why can't we have a woman like THAT running for office here? Somebody who
sees, addresses, and solves a problem.

And to sweeten the deal (of electing a foreigner - remember, some want Arnold
Swartznegger too) I'd be willing to limit her to just two terms - if the
Congressional deadbeats and losers would start to limit their OWN terms to just
two, or if (crikey!) we could find a Prez with the gumption to write and sign an
Executive Order mandating no more than two terms for Congress Critters - and
then let SCOTUS sort out the legality of ALL term limits in this Age of

[ Reply to This | # ]

Wheres the coverage of Microsofts UNG ?
Authored by: Anonymous on Wednesday, February 27 2008 @ 10:41 PM EST
I havent seen GL comment on UNG yet, and M$'s plans for that abomination

[ Reply to This | # ]

I'm still curious, if M$ did actually pay any of these fines
Authored by: Anonymous on Thursday, February 28 2008 @ 03:08 AM EST
As the comissioner said it is nearly 1.7 billion.
But if it was unpaid, it is just like anything else in this story: idle talk.

[ Reply to This | # ]

How to spend that fine money
Authored by: Anonymous on Thursday, February 28 2008 @ 02:09 PM EST
> Ultimately, they go into a fund whereby taxpayers pay less to Europe.

What would really get Microsoft's attention would be to spend some of that money
to reverse some of the injustice caused by Microsoft's actions. For example,
use the fund to pay open source groups to develop open standards. Or set up a
legal fund to defend Microsoft competitors from empty Microsoft patent threats.

[ Reply to This | # ]

Break the monopoly and everything else will fall into place
Authored by: Superbowl H5N1 on Friday, February 29 2008 @ 05:24 AM EST

Break the monopoly. Once the monopoly is gone, the monopoly rents go away and at the same time a double-portion of illegal and anticompetitive practices become difficult or impossible.

However, M$ hasn't paid yet in this case nor in most other cases. In a few instances it has gone through the motions of providing vouchers. For all the EC's posturing, it seems toothless. M$ has dragged this case on for a decade, with the EC's inaction, it'll go on for another half decade at least. At the end M$ will pay with coupons for 10% off the next M$ purchase and the EC will call it case closed.

Even if the fines were paid today in cash, they're still small compared to either the economic damage done or to M$' EU-based income. At best, it just becomes an extra 3% as the cost of doing business, to be passed on to M$ customers.

Marketshare is the only currency which will have any effect on the behavior.

[ Reply to This | # ]

vindictive Neelie Kroes .. ?
Authored by: emacsuser on Friday, February 29 2008 @ 10:42 AM EST
"given all these signals which they've been sending you in your pleasant
conversations you've had with Steve Ballmer in Rotterdam, in restaurants near
Rotterdam, does it not seem to the outside world to be rather vindictive"

Who was it who asked that question and and why was Neelie so 'vindictive',
especially after she had a sitdown with Steve in a restaurant, Italian no

The thing Neelie is beginnging to realize is that there is nothing MS won't say
to get the contract.

'wait a minute .. you actually meant us to keep our word :)

[ Reply to This | # ]

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