European Union antitrust officials announced late last month that they are considering fining Microsoft Corp. (MSFT) for failing to fulfill its antitrust obligations to the EU. The fine could be as high as 10 percent of Microsoft’s annual revenue, or about $7 billion.
That isn’t a paper threat. The EU has levied huge fines against Microsoft before. Governments should wield that kind of immense power against private parties only when they are certain a real wrong is being corrected. Unfortunately, everything about the EU’s antitrust history with Microsoft should make us question whether that is the case here.
Microsoft’s battle with the EU also offers a broader cautionary tale: Companies can create real risks for themselves and shareholders when they make product-design commitments to settle government actions. We have seen this happen in recent settlements between the U.S. Federal Trade Commission and Google Inc., Facebook Inc. and MySpace Inc. In each case, the companies face an extra layer of regulation for the next 20 years for products that could change daily. Google may soon face new antitrust actions in the U.S. and the EU for its search engine design and patent licensing practices.
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