BRUSSELS, Belgium - The European Union on Thursday threatened to fine Microsoft Corp. up to 2 million euros ($2.37 million) a day for failing to obey its 2004 antitrust ruling, saying the company was being intransigent about sharing information regarding its software blueprints with competitors.
Microsoft retorted that the EU Commission was trying to undermine its Windows operating system with ever-more-drastic demands for technological transparency, and that it would contest the measure under EU law.
The EU head office took new legal steps against Microsoft on Thursday aimed at forcing the company to provide better documentation so its software programs can be used with competitors' products. Microsoft has until Jan. 25 to answer the complaint.
"I have given Microsoft every opportunity to comply with its obligations. However, I have been left with no alternative other than to proceed via the formal route to ensure Microsoft's compliance," said EU Antitrust Commissioner Neelie Kroes.
Microsoft said, however, that the Commission's latest demands on opening up its software specifications would also open the door to the cloning of the company's core product, the ubiquitous Windows operating system.
"Of particular concern is the Commission's latest demand that the internal workings of Windows be documented and licensed, which can open the door to the production of clones of parts of the Windows operating system," Microsoft General Counsel Brad Smith said in a statement.
On top of that, Microsoft retorted that the EU Commission and a trustee monitoring the case had failed to take proposals it made last week fully into account before taking the action. No details of the Microsoft proposal were immediately available.
"In the interest of due process, we think it would have been reasonable for the Commission and the Trustee at least to read and review these new documents before criticizing them as being insufficient," Smith said.
The EU said it was also investigating the royalties Microsoft would charge for using its software information and said another legal challenge might be issued if it was unhappy with the financial demands.
To back its claim, the EU Commission on Thursday issued a formal "statement of objections," a measure that could lead to the hefty daily penalties that would be backdated to Dec. 15.
The EU Commission said it based its decision on a report by the monitoring trustee of the 2004 agreement which said Microsoft's concessions were insufficient so far.
"Any programmer or programming team seeking to use the technical documentation for a real development exercise would be wholly and completely unable to proceed on the basis of the documentation. The technical documentation is therefore totally unfit at this stage for its intended purpose," the report by British computer scientist Neil Barrett said.
"The documentation appears to be fundamentally flawed in its conception, and in its level of explanation and detail. ... Overall, the process of using the documentation is an absolutely frustrating, time-consuming and ultimately fruitless task. The documentation needs quite drastic overhaul before it could be considered workable."
Microsoft shares fell 16 cents to $26.57 in early trading on the Nasdaq Stock Market.
The EU ordered Redmond, Wash.-based Microsoft in March 2004 to pay 497 million euros ($613 million), share code with rivals and offer an unbundled version of Windows without the Media Player software for what it saw as an abuse of its dominant position in the industry. The Court of First Instance, the EU's second-highest court, has not yet set a date to hear Microsoft's appeal.
EU spokesman Jonathan Todd did not comment on the second part of the case: How well Microsoft had obeyed the EU order to sell a version of its Windows desktop software without Windows Media Player. The EU and Microsoft negotiated for months on the content and name of the software which finally arrived in stores in June 2005.
Computer manufacturers and retailers have been lukewarm on the new version, Windows XP N. There is no difference in price between the two versions.
Microsoft now has five weeks to react to Thursday's statement of objections and may have an oral hearing with antitrust authorities. The company said it already had done its utmost to live up to the conditions of the ruling.
"We've shipped a new version of Windows, we've paid a historic fine, and we've provided unprecedented access to Microsoft technology to promote interoperability with other industry players. In total, we have now responded to more than 100 requests from the Commission," Smith said.
He complained the Commission was seeking ever-more-drastic concessions as the legal fight dragged on.
"We continue working quickly to meet the Commission's new and changing demands," he said. "Yet every time we make a change, we find that the Commission moves the goal post and demands another change."