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Thursday, February 28, 2008

EU hands Microsoft a record fine of $1.3 billion

SEATTLE — Microsoft (MSFT) on Wednesday bore the brunt of Europe's desire to send out a message that it expects big corporations to respond to antitrust sanctions in a timely, contrite manner.

The European Commission fined Microsoft a record $1.3 billion, adding to a $357 million fine handed down in July 2006.

Both fines stem from Microsoft's slow compliance with sanctions in an antitrust case that originated in 2004. Microsoft for years had used delaying tactics and vigorously pursued appeals. But last fall the software giant reversed strategies, saying it wanted to put the case to rest.

It has since taken several steps to address a lingering dispute over an order to make it easier for rival software applications to tie into its Windows operating system, which runs 90% of the world's PCs and many corporate servers.

But the record fine underscores the commission's skepticism. "Talk is cheap," said Competition Commissioner Neelie Kroes. "Flouting the rules is expensive."

Microsoft's actions have stifled innovation and affected millions of people around the world, Kroes said. She called the latest fine "a reasonable response to a series of quite unreasonable actions."

Microsoft issued a statement saying the issues for which it was fined have been resolved. It could appeal the fine. But doing so would mean reverting to the confrontational legal strategy it is trying to make a break from, says Ted Henneberry, a London-based antitrust attorney at Heller Ehrman. "Both parties are trying to put this behind them and move on," he says.

The sticking issue: Regulators say the adjustments the company made in 2006 and 2007 in the royalty rates and terms set forth for tying rival programs into Windows fell short.

Last week, in a move Microsoft says was not related to the antitrust tussle, the company announced another round of adjustments to royalties and usage terms for tying into Windows as well as Office, its suite of clerical software. But the commission followed through and levied the record fine anyway.

Henneberry says the commissioners wished to let it be known that they "take offense because Microsoft didn't come up with these rates soon enough to please us." He called the fine "grossly disproportionate."

Separately, the commission must approve Microsoft's proposed takeover of Yahoo. Henneberry says the merger should be reviewed as a completely separate matter. "The merger does not involve conduct in the marketplace," he says. "The commission will have to look at the merger on the merits. It won't be, 'We don't like what you've done in the past, Microsoft.' "

By Byron Acohido, USA TODAY
Contributing: The Associated Press

Web site shutdown backfires

Info didn't vanish -- it spread

SAN FRANCISCO - An effort at damage control has snowballed into a public relations disaster for a Swiss bank seeking to crack down on a renegade Web site for posting classified information about some of its wealthy clients.

Documents from Bank Julius Baer containing information about several bank clients, including San Diego venture capitalist Jonathan Lampitt, were posted last month on Wikileaks.org. The site purports to discourage unethical behavior by corporations and governments by putting leaked documents online.

The Web site claimed the documents showed tax evasion and money laundering schemes at the bank's Cayman Islands branch. Lampitt's lawyer says his client was interviewed and cleared of any wrongdoing by the FBI in 2005 after a former Bank Julius Baer employee allegedly circulated the same documents.

The lawyer, Jim Ellis, said he initially received a call from a bank executive alerting him to the Wikileaks posting and saying the leak was the work of the same disgruntled former employee. Ellis was assured the bank would do everything possible to remove the sensitive documents.

In federal court in San Francisco, the bank asked a judge to take down the site. Much to the outrage of free speech advocates and others, the judge did.

But instead of the information disappearing, it rocketed through cyberspace, landing on other Web sites and Wikileaks' own "mirror" sites outside the U.S. The digerati call the online phenomenon of a censorship attempt backfiring into more unwanted publicity the "Streisand effect."

Techdirt Inc. chief executive Mike Masnick coined the term on his popular technology blog after the actress Barbra Streisand's 2003 lawsuit seeking to remove satellite photos of her Malibu house. Those photos are now easily accessible.

Masnick said the bank's lawsuit demonstrates the ineffectiveness of such legal actions in the Internet age, when anyone with a computer and online connection can thumb his nose at a judge's ruling and resurrect the "banned" information.

"It's a perfect example of the Streisand effect," Masnick said. "This was a really small thing that no one heard about, and now it's everywhere and everyone's talking about it."

The flap has also become an anti-censorship cause, drawing legal filings from the ACLU, the Electronic Frontier Foundation and several media organizations, including The Associated Press. Those arguments will be heard Friday when the bank presses on with its efforts to have Wikileaks permanently barred from posting the documents.

The legendary Swiss bank has a lot at stake. It has catered to the world's super wealthy for more than 100 years with guarantees of discretion and privacy that are the bedrock of the Swiss banking system.

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by: Paul Elias, The Associated Press
The News & Observer Feb. 28, 2008