Forbes is calling it, rightly, “The Mother of all EU Fines”:

The latest episode in Microsoft’s tempestuous relationship with the European Competition Commission ended with a bang Wednesday, as Commissioner Neelie Kroes slapped down an 899 million euro ($1.35 billion) fine on the company for not completely complying with an antitrust ruling that dated back to 2004. It is by far the largest EU fine ever imposed on a company.

Wow - I cannot even imagine that much money. That is a price tag that will pain even the cash rich Microsoft.

Here is the reasoning behind the EU’s decision:

The fine, which Microsoft will probably pay, is entirely retrospective, relating to a period of “non-compliance” before Oct. 22, 2007. It relates to the “unreasonable prices” the Commission is claiming Microsoft charged, before that date, to other software developers for access to documents that explained how they could create software that interfaced with Microsoft servers.

Between June 21, 2006, when that information was made available, and Oct. 21, 2007, Microsoft had charged software developers royalties of 0.7% on the revenues of their products that were developed using protocols the software giant had provided.

After that date, Microsoft agreed to reduce the rate to 0.4%, following directives from the Commission to charge a more “reasonable” rate. (See: “EU’s Hard Line Cows Microsoft”) But it probably knew that fines were ahead for the prior period, when it had charged a higher rate.

Microsoft is heading the same way as UK telecom giant BT. They will soon be put into a regulatory box where they are not permitted to compete with the competition. The EU needs to seriously consider these business practices before harming more businesses.