E.U. Fines Microsoft $732 Million Over Browser

BRUSSELS — The European Commission on Wednesday fined Microsoft €561 million for failing to live up to a settlement agreement offering consumers a choice of Internet browsers. 

The fine, equivalent to $732 million, is first time that E.U. regulators have punished a company for neglecting to comply with the terms of an antitrust settlement, and it could signal their determination to enforce deals in other cases, including one involving Google, where such an agreement is under discussion. 

“Legally binding commitments reached in antitrust decisions play a very important role in our enforcement policy, because they allow for rapid solutions to competition problems,” said Joaquín Almunia, the Union’s competition commissioner. “Of course such decisions require strict compliance” and the “failure to comply is a very serious infringement that must be sanctioned accordingly.” 

The penalty imposed Wednesday brings the overall fines imposed on Microsoft by European antitrust regulators during the past decade to €2.26 billion. 

“We take full responsibility for the technical error that caused this problem and have apologized for it,” Microsoft said in a statement.  “We provided the commission with a complete and candid assessment of the situation, and we have taken steps to strengthen our software development and other processes to help avoid this mistake – or anything similar – in the future,” Microsoft said. 

The commission can levy a fine totaling as much as 10 percent of a company’s global annual revenue, but fines are usually much lower. 

The largest fine ever levied by the European authorities in an antitrust case was €1.1 billion, or $1.4 billion, in 2009 against Intel for abusing its dominance in the computer chip market. Intel is still appealing that ruling.
Although Microsoft has appealed many of its past punishments, it may be reluctant to do so this time, preferring to focus on its rivalry with Google. Microsoft is among the companies that have complained about Google’s business practices to Mr. Almunia. 

The penalty Wednesday stemmed from an antitrust settlement in 2009 that called on Microsoft to give Windows users in Europe a choice of Web browsers, instead of pushing them to Microsoft’s Internet Explorer. 

Microsoft failed to offer users such a choice for more than a year — apparently without the failure’s being noticed by anyone at the company or the commission. 

The company admitted the problem and apologized last year. It said the failure had been a result of a technical issue that had escaped its notice, and it updated its Windows 7 and Windows 8 software to give European users the browser choice. 

The fine comes as Mr. Almunia’s office is negotiating with Google to try to resolve the commission’s concerns about that company’s dominance of the Internet search and advertising markets. Even if Google and the commission reach a settlement, a substantial fine for Microsoft would serve as a warning that a company would violate such a settlement at its financial peril. 

Antitrust regulators find that “monitoring is time consuming and resource intensive” and “it looks like Microsoft was able to forget about the Internet Explorer commitments without anyone noticing,” said Emanuela Lecchi, a partner in London at the law firm Watson, Farley & Williams. “So it would seem to me that the commission may wish to make an example of Microsoft.” 

The European Commission has been formally investigating Google since November 2010. Mr. Almunia offered the company a settlement last May after finding that it might have abused its dominance in Internet search and advertising by giving its own products an advantage over those of others, even while maintaining that it offered neutral results. 

Mr. Almunia and Google have been negotiating since then, and a final agreement may not come until later this year, suggesting that the strategy of seeking quick results in antitrust technology cases through settlements instead of lengthy legal battles could be coming undone. 

The commission has taken a tougher line with Google than U.S. regulators did. The Federal Trade Commission decided in January after a 19-month inquiry that Google had not broken antitrust laws. But Mr. Almunia has insisted that Google make changes to the most sensitive area of its business, online search.  

The latest dispute with Microsoft stemmed from the settlement of a case concerning Microsoft’s dominance in Internet browsers, a position the company has ceded to market forces in recent years. In Microsoft’s 2009 settlement, the company did not pay a fine, but it agreed to install a system called Browser Choice Screen with Windows. It was intended to offer software like the Chrome browser from Google and the Firefox browser from Mozilla as alternatives to Internet Explorer, Microsoft’s browser. The choice was to be offered for five years, according to the agreement. 

More than 15 million European users of the Windows 7 SP1 version of the software were not offered a choice of browsers for 14 months between 2011 and 2014, Mr. Almunia told a news conference Wednesday. 

Millions of European users of the Windows 7 SP1 version of the software may not have been offered a choice of browsers from February 2011 to July 2012, according to E.U. officials. 

The company said it learned of the error when the commission sent a notification about reports it had received indicating that alternative browsers were not being offered on some personal computers. 

Microsoft’s failure to comply with the European order has already resulted in financial penalties of a different sort for company executives. In a filing with U.S. financial regulators last October, Microsoft said that Steven A. Ballmer, the company’s chief executive, and Steven Sinofsky, then the head of its Windows division, had received less than the full annual bonuses they were eligible for, in part because of the issue in Europe.
A month later, Mr. Sinofsky left the company in a decision that was described as “mutual” by people briefed on the matter. 

Nick Wingfield contributed reporting from Seattle

Source:  The New York Times