Microsoft Clobbered With Massive Fine

Microsoft has been fined a record £331million by the European Commission.

The cash penalty was accompanied by orders to dismantle Microsoft's sales monopoly by no longer pre-installing the firm's Media Player with its Windows operating system.

The company was accused of breaching EU competition rules by "bundling'' its own software and other services with its Windows system. That has made it difficult for other software manufacturers to compete - particularly as Microsoft has withheld the technical codes that allow Windows-based personal computers to work better with servers.

Microsoft said the information is its intellectual property and that offering a complete package is part of its commercial strategy. The strategy has worked well - more than 90 per cent of personal computers worldwide run on Microsoft software.

Today's ruling in Brussels followed a four-year investigation led by Competition Commissioner Mario Monti, who 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.'' But the real battle has only just begun: Microsoft is appealing against the fine to the European Court of Justice and a final verdict could take five years.

Meanwhile, Microsoft will be seeking suspension of the Commission's order to start selling within 90 days a version of Windows without Media Player and to make available within 120 days the information other companies need to produce compatible rival server products. Microsoft founder Bill Gates is furious that the EU is interfering when the firm is already subject to antitrust laws in America .

But Mr Monti said the company's commercial methods affect millions of European customers and must comply with European Union laws. With a healthy bank balance estimated at nearly £40billion, Microsoft will not be troubled by the size of the fine, even if it is the biggest ever sought by the Commission against any company.

But the knock-on effect of changing the way Microsoft markets its products in Europe could be huge.