The European Union Commission has fined Microsoft Corp. €561 million ($733 million) for breaking the terms of an earlier agreement to offer users a choice of internet browser.
The penalty is a first for Brussels — no company has ever failed to keep its end of a bargain with EU authorities before.
The commission’s top regulator, Joaquin Almunia, said at a press conference in Brussels, Belgium Wednesday that negotiated settlements are vital for enforcement to be carried out quickly. But he warned that the whole point would be undermined if companies then don’t abide by the terms of the settlement.
"They must do what they committed to do, or face the consequences," he said.
Almunia added that the large fine took into account the size and length of time the company violated the terms of its agreement, as well as the need to defer other companies from backsliding on their promises to competition authorities. He said the fine was less than it might have been because Microsoft had co-operated with the investigation.
Quite a profitable racket they have there.
Microsoft Corp. is facing the prospect of a fresh, hefty fine by the European Union after the U.S. software giant failed to meet an earlier promise to offer users a choice of different Web browsers.
The European Commission on Wednesday filed a formal complaint against Microsoft for not following through on a commitment to offer its users alternatives to its own Internet Explorer Web browser on a recent version of its Windows program.
The Redmond, Wash., company had agreed to the measure three years ago and, if proven guilty, could face a maximum fine of as much as 10% of its total annual revenue, or $7.4 billion. Analysts, however, say it would be less.
There’s less and then there’s a lot less. I would offer the suggestion that one never stand between a bureaucrat and some loot.
During a news conference in Brussels, the EU’s antitrust chief Joaquin Almunia underlined the gravity of the offense and signaled his intention to use the case as a deterrent to other firms. This is the first time a company is being investigated for breaching its commitments.
"This is a very serious message not to infringe the commitments that had been agreed," Mr. Almunia said."Companies should be deterred from any temptations to renege on their commitments or even neglect their duties," he said.
In a statement, Microsoft said it "sincerely apologized" and reiterated that the mistake was a technical glitch on its Windows 7 version, known as Service Pack 1.
It’s going to be an expensive mistake.
The chief marketing officers of Procter & Gamble, Walmart, Ford, Verizon, Coca Cola, Unilever, General Electric, American Express, Kraft and 30 other companies signed a letter to Microsoft CEO Steve Ballmer, complaining about the "do not track" (DNT) function planned for Internet Explorer 10.
IE10 will launch with a default DNT position, preventing consumers from being targeted by advertisers. The letter was timed to rain on Microsoft’s parade at Advertising Week, at which it launched new native ad products for Windows 8 and a redesigned MSN.
It is rare for advertisers to publicly criticize the media sellers they deal with. It’s rarer still for them to time their criticism to inflict maximum PR damage. And it’s rarest of all for them to band together — even with competitors — and sign a statement against a marketing partner that takes billions of their dollars.
The letter is thus the most humiliating form of public dressing-down Microsoft could have received from its clients.
I really hate to break it to the Web advertising bigwigs, but Microsoft is on the side of the angels on this one. The only thing more annoying than ads following me from site to site are the constant requests that I "like" some company or product on Facebook. Those that feel lonely without be tracked by ravenous Web marketers can always opt-in, just like with email advertising or Facebook. Very few consumers will do that, of course, which is why the big Web advertisers are having the vapors. Don’t worry guys, you can always besiege us with admonitions to "please let us track you" just like you do with Facebook.
(First version lightly edited.)
The European Union Competition Commission today dropped their Web browser antitrust case against Microsoft after final agreement was reached on Microsoft providing a Web browser choice to EU Windows users:
The European Commission has adopted a decision that renders legally binding commitments offered by Microsoft to boost competition on the web browser market. The commitments address Commission concerns that Microsoft may have tied its web browser Internet Explorer to the Windows PC operating system in breach of EU rules on abuse of a dominant market position (Article 102 of the Treaty on the Functioning of the European Union -TFEU). Microsoft commits to offer European users of Windows choice among different web browsers and to allow computer manufacturers and users the possibility to turn Internet Explorer off. Microsoft is also publishing today an undertaking whereby it commits to make far-reaching interoperability disclosures.
I haven’t yet seen the Microsoft "interoperability undertaking" which is supposed to be published today, but that harks back to the previous EU Microsoft antitrust case where interoperability disclosures were a perennial source of contention. As for the browser choice, here’s how the EU says it will work if you are a EU Windows user:
- [Affects] More than 100 million European users of Windows operating systems (XP, Vista, 7, and successors) and many millions more in the future.
- You will be offered a ‘browser Choice Screen’ where you can freely choose one (or more) of the 12 most popular web browsers, including Mozilla Firefox, Google Chrome, Apple Safari and Opera.
- Each browser will be accompanied by information from the producer, to help you – the customer – make a free and informed choice.
- If you have Microsoft’s web browser set as your default browser and have chosen to ‘automatically accept Windows updates’, you will be automatically directed to the ‘Choice Screen’. If updates are not automatically installed, you will be offered an option to confirm you want to receive the Choice Screen update.
- The browser Choice Screen software update will start in March 2010.
- The Choice Screen update will be available for 5 years.
This strikes me as a smart move on Microsoft’s part. Butting heads with the Neelie Kroes has proven to be be a no-win strategy and offering the choice screen is cheap and more cynically, will likely not discernibly affect the market share of Internet Explorer. Yes IE’s share is dropping in Europe and elsewhere, but my impression is that any PC user savvy enough to want another Web browser can already find it without a choice screen. So, the Eurocrats are now happy and Microsoft has dodged another expensive legal bullet.
UPDATE: Microsoft’s Brad Smith, Senior Vice President and General Counsel has issued a statement and besides discussing the choice screen, details the "interoperability undertaking":
The second measure is a “public undertaking” that covers interoperability with Microsoft’s products—the way our high-share products work with non-Microsoft technologies. This applies to an important set of Microsoft’s products—our Windows, Windows Server, Office, Exchange, and SharePoint products. We believe it represents the most comprehensive commitment to the promotion of interoperability in the history of the software industry. Under this undertaking, Microsoft will ensure that developers throughout the industry, including in the open source community, will have access to technical documentation to assist them in building products that work well with Microsoft products. Microsoft will also support certain industry standards in its products and fully document how these standards are supported. Microsoft will make available legally-binding warranties that will be offered to third parties.
Our interoperability undertaking reflects the policy outlined by the European Commission in a major policy speech given by Commissioner Neelie Kroes in June 2008. At that time, the Commissioner said that companies offering high-share software products should be required to (i) disclose technical specifications to enable interoperability; (ii) ensure that competitors can access complete and accurate information and have a remedy if not; and (iii) ensure that the technical specifications are available at fair royalty rates, based on the inherent value of the technology disclosed. Our interoperability undertaking, developed through extensive consultation, implements this approach in full.
As we’ve said before, we are embarking on a path that will require significant change within Microsoft. Nevertheless, we believe that these are important steps that resolve these competition law concerns.
Click through for a host of Microsoft documents including the Microsoft Public Undertaking (Word file) itself. This is being overshadowed in the news by the browser choice screen, but I suspect the interoperability agreement is more important. I have not read the fine print yet or seen the Open Source reaction, but I hope that the EU Competition Commission and Microsoft really and truly understand each other on this topic or things could get quite unpleasant.