Microsoft(MSFT) Internal Mail on EC Decision

by alec on July 12, 2006

For those seeking additional clarity on Microsoft’s view of the EU decision, here’s Microsoft legal beagle Brad Smith’s own words in an internal email to employees.  He definitely sees the EC decision as being unjustified, and unfair.  The transcript of his press conference is also worth a read.

From: Brad Smith (LCA)
Sent: July 12, 2006 1:48 PM
To: Microsoft and Subsidiaries: All FTE
Subject: Background on the EU Fines and Microsoft’s Compliance Efforts

As you’ve probably seen, the European Commission today announced that it does not believe that Microsoft has fully complied with the technical documentation requirements of its March 2004 ruling, and therefore will fine Microsoft € 280.5 million (US $357 million).

I want to provide some perspective on today’s announcement, and let you know both how hard we have worked to comply and how we plan to proceed going forward.

That Commission’s 2004 decision required Microsoft to do two things. First, it ordered us to produce and sell a stripped-down version of Windows XP in Europe that does not include Windows Media Player. We complied fully, although there has been almost no consumer demand for this version. Second, the Commission required that we license some of our Windows server communications protocols and provide what it called “complete and accurate technical specifications” to assist licensees in implementing these protocols.

In our view, the issue here is not about a lack of compliance, it’s about a lack of clarity about what the Commission’s expectations were for “complete and accurate technical specifications.” We began work on the technical documentation immediately upon receiving the Commission decision, and delivered more than 10,000 pages of documentation in December 2004. We did not receive substantive feedback until last September, nine months later. When it became clear that the Commission had different expectations over how the technical documents should be written, we repeatedly pressed for greater clarity. Then we delivered revisions promptly, offered unlimited technical assistance, and even made our source code available to competitors in an effort to resolve the impasse. In short, I truly believe the company responded quickly and in good faith to a government order that was unclear and undefined – and that we have complied with our obligations.

Despite all this effort, we’ve had a very hard time trying to get a clear statement from the Commission on how they want the technical documents to be written. This spring, we finally made a breakthrough after a group of engineers from Microsoft met with Professor Neil Barrett, the trustee appointed last fall by the Commission. A great deal of progress was made during these face-to-face meetings and an aggressive work plan was put in place to deliver revised documentation through a series of seven milestones, beginning in April and ending on July 18.

To meet the demands of the schedule, a team of more than 300 employees was assembled, including some of the company’s most senior engineers. Many of those involved played a central role in writing the protocols covered by the documentation. This team has worked around the clock to successfully meet each of the six previous milestones. Their tireless and persistent efforts and the high quality of their work is a testament to the great things people can accomplish when they pull together in a time of need.

During the last few months, we’ve been encouraged by positive feedback we’ve received from the trustee. We had hoped that this effort would demonstrate to the Commission that we would be fully in compliance by their July deadline. The fact that the Commission decided to fine us despite our massive compliance efforts is disappointing. And it’s hard to understand why the Commission is imposing this large fine when the process is finally working well and the agreed-upon finish line is still nearly two weeks away. 

So what’s next? First, we will push ahead to finish the technical documentation work later this month to meet the deadline established by the Commission. We are 100 percent committed to compliance, and we will not allow this fine to distract us from meeting our responsibilities.

Second, we will appeal this fine. We have great respect for the Commission, but we do not believe any fine – let alone a fine of this magnitude – is warranted given the lack of clarity in the Commission’s original decision and our diligent, good-faith efforts to comply over the past two years.

Third, we will maintain our commitment to Europe. We will not allow this fine to affect our important relationship with the European Commission. We will continue to partner with the Commission on important issues like education, innovation, and economic development in Europe.

Finally, we will continue to move forward with our plans for breakthrough products and services. A lot of people are wondering what this fine means for Windows Vista and other future products.  The answer is that we have worked hard to ensure that Windows Vista is consistent with the requirements of European law. We began sharing early versions of Windows Vista code with the Commission more than a year ago, and we are working to ensure that any questions they have about Vista get answered and any concerns are addressed.

In closing, I want to convey my admiration and my thanks to the engineering and documentation teams that have worked so hard throughout this entire process to meet the Commission’s demands and the trustee’s schedule. I know that you have sacrificed weekends and holidays, and worked through many long nights. Regardless of the Commission’s decision, Steve, Bill, and the entire senior leadership team at Microsoft deeply appreciates your hard work. I thank you very much.

I hope this information helps to answer any questions you may have about the European Commission’s announcement today, or Microsoft’s strong record of compliance. Despite today’s negative news, we can take pride in how hard our company has worked to live up to our responsibilities. I am hopeful that we can put this documentation issue behind us very soon.

Brad

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