BRUSSELS, Belgium -- The European Union has fined Microsoft a record €497 million (more than $600 million) for abusing its "near-monopoly" with Windows to squeeze competitors in other markets.

The EU's antitrust authority said "because the illegal behavior is still ongoing," it would also demand changes in the way the U.S. software giant operated.

It gave Microsoft 90 days to make available a version of its Windows operating system to PC makers without a media player.

Microsoft was also given 120 days to give programming codes to rivals in the server market, so their products can have "full interoperability" with desktop computers running Windows.

"Dominant companies have a special responsibility to ensure that the way they do business doesn't prevent competition ... and does not harm consumers and innovation," The Associated Press reported EU Competition Commissioner Mario Monti as saying on Wednesday.

"Today's decision restores the conditions for fair competition in the markets concerned and establishes clear principles for the future conduct of a company with such a strong dominant position."

Microsoft was found guilty of monopolistic behavior in a U.S. antitrust case, but settled in 2001 with the Bush administration.

A U.S. appeals court is considering whether that landmark deal was adequate to restore competition.

One complaint surrounds the Microsoft Media Player, which plays music and video clips. It is a free add-on to Windows.

Redmond, Wash.-based Microsoft says that this feature benefits consumers, but competitors like Real Network's player and Apple's Quicktime say it threatens their business and they want it unbundled.

At stake is Microsoft's market share in the rapidly growing home entertainment market.

At the moment, no one company is dominant and Microsoft is facing stiff competition in this arena, but the EU is concerned about the software giant's control of this market in the future.

"Sony is coming at it from the Playstation side. They see the Playstation as being the way to be the central of home entertainment. Microsoft sees it's going to be the personal computer. Some of the mobile phone companies see future generations of mobile technology as being the way it's going to come," says Bryan Glick, from Computing newspaper.

The EU is forcing Microsoft to offer a version of Windows XP without Media Player, which analysts say could result in higher costs for consumers.

"If it were to be obliged to offer versions both with and without Media Player, then that would mean we would probably have double the number of consumer PC configuration in our shops. Of course this is product that is built before it is sold," says Brian Gammage from computer consultancy Gartner.

These complaints against Microsoft are based on 5-year-old technology, which is a lifetime in the technology world.

But EU competition chief Mario Monti says Wednesday's formal ruling clearly sets down a precedent to show Microsoft what it can and cannot add on to its next operating system due out in 2006.

Microsoft's next version of Windows is expected to include a Web search engine that would challenge Google and Yahoo.

The EU is already looking into charges from Microsoft competitors that its latest desktop operating system, Windows XP, is designed to help extend Microsoft's dominance into new markets such as instant messaging and mobile phones.

For its part, Microsoft has accused the EU of going too far in seeking a record fine for alleged antitrust abuses, saying it is being penalized for behavior permitted in the United States.


http://edition.cnn.com/2004/BUSINESS....eu/index.html