Update: Microsoft says EU denied it rights in antitrust case

Microsoft Corp. launched a last-ditch attempt to stave off the threat of million-dollar-a-day fines on Wednesday when it submitted its formal response to European Commission charges that it is failing to comply with an antitrust ruling.

In a statement accompanying the submission, the company said that it had fully complied with the Commission’s demands to ensure interoperability with its server software and accused the Commission of disregarding “critical evidence” in the case.

The company submitted its formal response, a 75-page document, to the Commission’s complaints, known as an S.O. (statement of objections). In a statement, Microsoft said that “hundreds of Microsoft employees and contractors have worked for more than 30,000 hours to create over 12,000 pages of detailed technical documents that are available for license today.”

It added that the company had also filed two reports by software system engineering professors who examined the technical documentation. Those experts concluded that the interoperability information provided by Microsoft met “current industry standards” and that the company had provided “complete and accurate information,” according to the statement.

The European Commission issued a statement later Wednesday to say that it had received Microsoft’s reply and “will carefully consider the response.” The statement provided a chronology of sorts regarding the antitrust case and ruling, noting, “It is, of course, the European Commission that will decide whether Microsoft is compliant with the March 2004 decision, and not Microsoft.”

The Commission, the European Union’s antitrust authority, gave Microsoft until Wednesday to make a convincing case that it was complying with the 2004 ruling, which among other things ordered the company to ensure the interoperability of its server software with competitors. Based on information sent by the company last December, an independent trustee, computer professor Neil Barrett, said that the documentation Microsoft had provided was “useless.”

The company’s offer to grant access to the source code for the communications protocols for the server software has also received a lukewarm response by the Commission, which argues it does not help rivals develop products that can interoperate with Microsoft’s. Microsoft has no obligation under the ruling to disclose source code, the Commission statement said. While source code could “at best” complement the requirement that Microsoft provide “complete and accurate specifications” as called for in the 2004 ruling, “the onus is on Microsoft to explain … precisely how and why the source code offer is relevant to ensuring their compliance.”

Microsoft faces daily fines up to €2 million (US$2.4 million) if the Commission decides that the company has not complied with its ruling although the actual figure would likely be less than half that.

In its filing to the Commission, Microsoft also complained that the authority had failed to consider key information it had submitted and had “denied Microsoft due process in defending itself.”

Microsoft said that the Commission waited “many months” before informing the company that changes were necessary to the technical documentation. The company was only given a few weeks to make “extensive revisions,” the statement said. It also added that, when the Commission issued its formal statement of objections on Dec. 21, it had not read the most recent version of the documents, which the company sent Dec. 15.

The Commission statement issued Wednesday after Microsoft filed its document says that the Commission “is fully committed to guarantee due process.”

The Commission will decide in the third quarter if Microsoft’s response proves that it is complying, since the company requested formal hearings to present its arguments. The Commission needs time to consider the formal response and hearings, which are expected to take place in four to six weeks, and discuss its findings with a committee of E.U. member states’ competition experts.

Microsoft requested an oral hearing in the matter, and such a hearing is likely to occur “in the coming weeks,” the statement said. After any such hearing, and after consulting with the Advisory Committee of Member State Competition Authorities, the commission will then issue a decision. If the determination is that Microsoft is not complying with the ruling, the fine will be imposed, dating from Dec. 15 of last year and running until the date any decision is rendered. After that, if non-compliance continues, the Commission can take steps to continue the daily fine until Microsoft complies the with March 2004 ruling, the statement said.

Open-source software developers dismissed Microsoft’s move, calling it a “parody of compliance.” A statement by Carlo Piana, a lawyer who represents the Free Software Foundation Europe and Samba Team, said “Microsoft are not complying, they are offering pointless documents that will have the only effect to further tie competitors’ hand with futile, unreasonable and discriminatory conditions.”

Piana also dismissed the company’s offer to grant access to the source code. The company was only allowing developers to see the code as a reference, without licensing it. “Free software is going to stay miles away from it,” he said.

Companies that support the Commission’s case said they hoped that Microsoft had finally decided to comply with the ruling. Making full server interoperability information available on fair terms for proprietary software developers and the open-source community was “the only way to ensure full and fair competition in the European server software market,” said Simon Awde, chairman of the European Committee for Interoperable Systems (ECIS). ECIS represents companies including IBM Corp., Oracle Corp., Red Hat Inc. and Sun Microsystems Inc.

Nancy Weil in Boston contributed to this report.