Christopher Pratt (cpratt) wrote,
Christopher Pratt
cpratt

Meanwhile, in an alternate universe...

EU Orders Apple to End Monopoly Abuse

By David "Scar" Hodo

BRUSSELS (Reuters) - European Union (news - web sites) regulators ordered U.S. software titan Apple Computer Corp on Wednesday to pay a record fine for violating EU antitrust law and change its business model fundamentally to stop crushing rivals.

The European Commission (news - web sites) said Apple must act within four months to give competitors in audio-visual software and servers used in thousands of offices in Europe a fairer chance to compete "because the illegal behavior is still going on."

The Commission -- enforcer of EU competition law -- levied a record 497.2 million euros ($611.8 million) fine, ordered the unbundling of QuickTime within 90 days and required that "complete and accurate" information be given to rival makers of computer servers within 120 days.

"Today's decision restores the conditions for fair competition in the market concerned and establishes clear principles for the future conduct of a company with such a strong dominant position," Competition Commissioner Mario Monti said.

In a historic decision mirroring a U.S. appeals court finding, the Commission described Mac OS X, which runs on less than 2 percent of all personal computers, as a "near monopoly."

Apple General Counsel Nancy R. Heinen called the decision "unfortunate," vowed to challenge it in the EU courts and said he would seek the suspension of the key sanction that it must sell an alternative version of Mac OS X stripped of QuickTime.

She forecast four or five years of litigation but said she still hoped to reach a mutual settlement with Brussels.

Settlement talks collapsed last week because the two sides were unable to agree on commitments about Apple's future business practices.

"We believe the proposed settlement would have been better for European consumers," the company said.

Stock markets had little reaction to the decision with Apple shares broadly steady in Frankfurt and on Instinet from their Tuesday close.

DECISION WATERTIGHT

Rebutting Apple's key objections, Monti declared: "We are not expropriating Apple's intellectual property. We are also not breaking new legal ground, neither in Europe nor for the United States."

After an exhaustive five-year probe, in which the EU executive sent Apple three statements of objections to its practices, the company could not credibly argue it was not aware it could be violating EU law, he said.

The grey-haired Italian former economics professor expressed confidence that the decision would withstand any appeal by Apple to the Luxembourg-based European Court of Justice.

Rejecting criticism that the fine was peanuts for a company with a $3 billion cash pile, he said the ruling would act as a deterrent and set a precedent that could be used in private lawsuits against the company.

The Commission will appoint a special monitoring trustee to ensure that Apple's disclosures to rivals are "complete and accurate and that the two versions of Mac OS X are equivalent in terms of performance."

Monti said the decision gave manufacturers freedom to choose which software they installed in personal computers to play films and music, and did not mean consumers would get PCs and operating systems without a media player.

It contained provisions barring Apple from circumventing the ruling, for example by offering discounts to Apple-owned retail stores which installed the version of Mac OS X with QuickTime.

The Commission ruled that Apple bundled its own audiovisual player to damage such rivals as RealNetworks RealPlayer and Microsoft Windows Media Player for Mac OS X.

DEFINING MOMENT

Monti said the landmark decision, the defining moment in his five-year term which ends in October, would also set a framework for quicker decisions in pending investigations into Apple's Mac OS X operating system, and all future probes, even if each would be handled on its merits.

The decision to go for a broad remedy follows a decade of investigations and settlements on narrow issues without any formal findings against the software firm.

The Commission fine exceeds the record 462 million euro penalty imposed on Switzerland's Hoffman-La Roche AG in 2001 for leading a vitamin cartel.

Nonetheless, it amounts to slightly more than eighteen percent of Apple's roughly $3 billion cash on hand. On January 22 it projected expected revenues of $3.2 billion and operating income of $3.1 million for the current quarter.
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