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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.

[00:38]

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.

[08:36]

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

[08:45]

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?

[09:16]

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.

[10:27]

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?

[10:41]

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.

[12:11]

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]

[13:19]

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]

[15:34]

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?

[16:21]

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.

[19:16]

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%?

[19:49]

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.

[21:06]

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?

[21:38]

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.

[23:02]

[unrelated question and answer]


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