Microsoft v EU: Living proof that big fines don’t work

Eight years ago, Europe slapped Microsoft (s MSFT) with a huge fine — a then-record of €497 million ($621.1 million)– after an antitrust investigation found that the company had been unfairly using its market dominance and locking out competitors. Two years later, it added another €280.5 million because even though Microsoft had paid the first fine, it hadn’t changed its behavior. Then, in 2008 it cranked things up again: this time, with an €899 million fine — the largest ever at the time — for non-compliance.
Today, finally, it looks like the story might have come to an end: Microsoft’s appeal to have that fine overturned was rejected. The amount was discounted a little by a European judge, to €860 million, but still the company said it was “disappointed” by the decision and left the door open to a further appeal.
The European Commission was obviously pleased with the decision. Here’s E.U. Competition Commissioner Joaquin Almunia:

“Today’s judgment fully vindicates the enforcement action that the Commission took to ensure Microsoft’s compliance with its obligations… The judgment confirms that the imposition of such penalty payments remains an important tool at the Commission’s disposal.

There you go: a clear victory for the European regulators.
Or is it?
Here are three graphs that suggest to me that not only is it easy for Microsoft to suck up even huge fines like this — but by dragging the process out it has made it significantly less painful.
The first is Microsoft’s share price over the period since 2008, when the €899 million fine was levied. The fine doesn’t seem to have made much difference to its fortunes.

The second is Microsoft’s earnings between 2008 and 2011. On the left is €899 million for comparison. You can see it’s small fry compared to the overall picture.

And the third is the value of the Euro against the U.S. Dollar over the same period. The fluctuating exchange rate means that in 2008, it was worth $1.35 billion but today it’s $1.12 billion: Microsoft has effectively saved $230 million just by waiting — let alone the 4 percent discount included by the judge, which dropped it even further (to $1.07 billion).

Obviously, take this with a pinch of salt: you can make data say a lot of things. But it’s worth thinking about: while the European Commission may think that “the imposition of such penalty payments remains an important tool at the Commission’s disposal” it looks a lot to me like they are, in fact, pretty ineffective.