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Source: EU May Fine Microsoft $3.8 Million Per Day

Europe's competition watchdog plans to fine Microsoft (MSFT) up to 3 million euros ($3.8 million) a day if the U.S. software giant continues to defy a landmark antitrust decision, a diplomatic source said on Monday.

The source spoke as European competition regulators met to endorse a separate fine the European Union's executive arm will impose on the company on Wednesday for having failed to comply with a 2004 ruling that it abused its dominant market position.

The European Commission has never previously imposed such a penalty on a firm for defying an order to remedy an abuse. The current ceiling for the fine is 2 million euros a day, backdated to December 15.

The penalty to be announced on Wednesday, which could reach just over 400 million euros, comes on top of a record 497-million-euro fine the Commission levied in March 2004, when it found Microsoft guilty of anti-competitive business practices.

It signals the Commission's determination to force Microsoft to obey its order to share key information with rivals, as well as a loss of patience after the company had two years to comply and used a number of legal avenues to spin out the process.

The EU can fine a company up to 5 percent of the previous year's average daily turnover. Microsoft's turnover in 2005 was $40 billion, according to its Web site, averaging just less than $110 million a day.

The Commission, Europe's top antitrust authority, ruled in 2004 that Microsoft had shut out rivals by withholding information that would help them make server software as compatible as Microsoft's own with its ubiquitous Windows operating system.

It demanded that Microsoft make available that information to competitors and now says it has not done so sufficiently.

Microsoft has repeatedly said it has done everything the Commission asked it to do but the regulator's demands kept changing over the past two years.

FUNDAMENTALLY FLAWED

Both the company and the Commission declined to comment on Monday on the fines. Microsoft shares were up 0.8 percent at $23.49 by 1535 GMT.

The Commission set the wheels turning to fine Microsoft after more than 18 months of what it saw as foot-dragging. An independent monitoring trustee appointed to the case called the information Microsoft did provide "fundamentally flawed."

The Commission's hardline approach contrasts with that of the United States, which in 2000 had similar findings against Microsoft and originally required the company to be split.

This demand was later withdrawn but the company has yet to provide adequate technical information as ordered by the U.S. Justice Department in 2002.

Since the Commission threatened the fine, Microsoft has started working to come into compliance. According to an agreed-upon schedule, it is supposed to deliver the final results on July 18, a few days after the Commission meeting.

But it could take EU experts months to determine whether that information is sufficient.

Microsoft's rivals need the information so that their server software — which connects to PCs and handles such tasks as printing and signing on to a network — runs smoothly on Windows, which runs on more than 90 percent of the world's PCs.

Microsoft has separately appealed against the original 2004 decision to the Court of First Instance, Europe's second highest court. A hearing was held in May but a ruling will take months.

The company argued that sharing such information, which constituted its own hard work and innovation, would breach its intellectual property rights.