Microsoft Corp. (Nasdaq: MSFT) lost a European Union challenge to a $1.1 billion antitrust fine, with a court saying it “essentially” upheld the penalty.

The EU General Court cut the fine by 4.3 percent in a ruling today. The Luxembourg-based tribunal rejected all of Microsoft’s arguments over the fine levied by the European Commission for the company’s failure to obey an order to share data with rivals.

“The court essentially upholds the commission’s decision and rejects all the arguments put forward by Microsoft,” according to a court statement.

Microsoft’s Windows software powered 95 percent of personal-computers in 2004, when EU regulators fined the company and ordered it to offer a version of the software without a music and video player. Now, amid a global slump in PC sales, Microsoft is preparing to manufacture its first tablet to challenge Apple Inc.’s iPad.

The Commission’s top regulator Joaquin Almunia said the judgment “fully vindicates” his office’s action against Microsoft and “brought significant benefits to users.”

“A range of innovative products that would otherwise not have seen the light of day were introduced on the market,” thanks to the Commission, he said.

Microsoft was less enthusiastic.
“Although the General Court slightly reduced the fine, we are disappointed with the Court’s ruling,” the company said in a statement.

The world’s largest software company asked the court to void the fine imposed after Microsoft failed to comply with a 2004 antitrust order to provide rivals with data to help them work with the company’s operating-system software.

The court said it lowered the penalty to take into account a letter from the commission from 2005 that accepted limits on Microsoft’s supply of information to open-source software developers.

Earlier Fines

The fine was on top of Microsoft’s earlier penalties and surpassed only by a somewhat larger levy against Intel Corp.

Microsoft is the only company in more than 50 years of EU competition policy penalized for failing to comply with an order. The company reached a settlement in 2009, that allowed today’s appeal, in a bid to repair the company’s relationship with the European Commission.

Microsoft is now on the other side of the fence, filing complaints against Google Inc. and what is now its Motorola Mobility unit.

Microsoft argued at a hearing last year that regulators should have given it more guidance to avoid the fine. Under the initial decision, Microsoft was ordered to provide data to competitors to allow servers to connect to computers using the Windows operating system. It was also required to limit to a “reasonable” amount the royalties it charged.

Periodic Penalty

The fine was a so-called periodic penalty calculated because Microsoft was in breach of the EU order for 488 days, regulators said in 2008. The EU assessed Microsoft’s proposals for 306 days of that period, the company told judges at the hearing.

Microsoft also questioned EU reports prepared by a trustee responsible for monitoring the company’s compliance with the 2004 decision. Although Microsoft lost a 2007 appeal of the initial fine, the court ruled regulators were wrong to force the company to give powers to the independent trustee who had access to its documents, premises and software source code.

 (Bloomberg news contributed to this report.)