The European Union has fined Microsoft a record 497 million euros for violating anti-trust laws.

Wednesday, March 24, 2004 Posted: 10:11 AM EST (1511 GMT) 

BRUSSELS, Belgium (CNN) -- The European Union has fined Microsoft a record 497 million euros for violating anti-trust laws.

CNN Correspondent Jim Boulden explained the background to the case and what effect it will have for consumers.

Q. Why has the EU been involved in this case?

A. A number of U.S. companies filed formal complaints with the EU five years ago. Specifically, two U.S. companies asked the EU to investigate whether Microsoft used its dominance in PC operating software to stifle competition in other software markets.

Q. How is it different from the U.S. anti-trust case brought by Netscape?

A. A number of analysts see similarities between the cases, although U.S. and EU laws differ on what is abuse of a dominant position. The one similarity talked about by many analysts is that it took years for a verdict to be reached in both cases. In many ways these are old arguments based on old technology by the time they are settled.

Q. What is the EU ordering Microsoft to do?

A. The EU has fined Microsoft 497 million euros and set a precedent by asking for two specific remedies: one to allow competing server software to work better with Microsoft operating systems; the other to offer a version of Windows XP in Europe without its multimedia software.

Q. What does Microsoft plan to do next?

A. Microsoft plans to appeal against the case, and is looking to the European Court of First Instance to review the case and possibly stay the ruling while the appeal goes to the European Court, which could take years. Microsoft is still hopeful of an out-of-court settlement similar to the one that was nearly reached with the Commission last week.

Q. What effect will the verdict have on computer users?

A. Some analysts have said in Europe it will mean less choice if Microsoft is forced to take its Media Player software out of Windows. Microsoft says it will mean less functionality for many consumers since the vast majority of all PCs are sold with Windows software. MS rivals say it will give consumers the opportunity to review a number of media players that they can download off the Internet before choosing which one they like.

Q. What does it mean to Microsoft investors?

A. It has no effect. They don't have to pay the fine right away and it represents only 8 percent of Microsoft's annual turnover in Europe, Middle East and Africa. One analyst said the fine was like a parking ticket to a company such as Microsoft, whose annual turnover is $28 billion.

Q. Who will the EU target next?

A. There are still a number of cases involving Microsoft working their way through the EU's competition office. The EU hopes today's ruling sets a precedent to speed up those cases and to show Microsoft how the commission feels it is violating EU competition laws.