By Dow Jones Business News, March 06, 2013, 06:55:00 AM EDT
EU Fines Microsoft $732 Million in Browser Case
BRUSSELS--The European Union's competition watchdog hit Microsoft Corp. ( MSFT ) with a 561 million euro ($732.2
million) fine for breaking its promise to offer millions of users of its Windows operating system a choice of rival Web
The European Commission said the Redmond, Wash., software maker is the first company to break a voluntary agreement
with regulators, which would have allowed at least 15 million consumers to pick alternatives to its Internet Explorer
The penalty was the latest episode in over a decade of wrangling between the EU and Microsoft, which had already been
fined EUR1.64 billion for failing to provide rivals with information at fair prices and for tying its media player to
its operating system.
EU competition chief Joaquin Almunia had warned that he would use the noncompliance fine to set an example to other
companies that might break similar promises in the future.
"Such a breach is, of course, very serious, irrespective of whether it was intentional or not, and it calls for a
sanction," Mr. Almunia said in a prepared statement. "I hope this decision will make companies think twice before they
even think of intentionally breaching their obligations or even of neglecting their duty to ensure strict compliance."
Microsoft struck a deal with the commission in 2009 to address long-running concerns related to the way the company's
Web browser was tied to its Windows personal-computer operating system, which at the time had a 90% market share in
Microsoft promised to offer users a "choice screen" until 2014 to allow them to switch to other browsers. Despite
early implementation, regulators later received a complaint from a third-party and spotted that the choice had been
removed from February 2011 until July 2012. Internet Explorer's market share has dropped to just under 30% from 50%,
which the commission said is partly because of the introduction of the choice screen.
Microsoft said it took "full responsibility" for the removal, which it has blamed on a "technical" error. The company
said that it has since put in more stringent internal procedures to avoid a repeat. Chief Executive Steve Ballmer was
deprived of half of his bonus last year in part because of the Windows division's failure to provide a choice screen as
required by the European Commission.
While the commission said it had no reason to doubt that the removal of the choice screen was unintentional, the issue
shed light on the way the EU monitors compliance in such cases. In this instance, it was left up to Microsoft to send in
compliance reports, without EU regulators carrying out their own checks.
Mr. Almunia told reporters in Brussels on Wednesday that he was overhauling the commission's monitoring procedure and
would ask companies to be "far more careful" when carrying out checks.
Mario Mariniello, a research fellow at Bruegel, a Brussels-based think-tank, said the penalty was a "game changer"
that would give Mr. Almunia the stick to ensure settlements were respected.
This issue is likely to become especially important if, as expected, the commission reaches a settlement with Google
Inc. (GOOG) this year.
Mr. Almunia's team is examining concessions submitted by Google on Feb. 1 to address fears that the Internet-search
company is squeezing out rivals by promoting its own specialized search services, such as online mapping, and that it
may be copying, or "scraping," content such as travel and restaurant information from competitors. Regulators have also
voiced concerns over the exclusive advertising contracts that Google strikes with websites.
While it wasn't clear how Google planned to address those concerns, Mr. Almunia said last month the he could see
striking a settlement with the company by fall.
But rivals have warned that any "remedies" offered by Google--whose search engine has more than 90% of the European
market--could be hard for the EU to monitor, given the complexity of the company's search mechanisms and the continuous
evolution of its services.
If no deal is reached, the Mountain View, Calif., company could be fined up to 10% of its annual revenue. Google
posted $50.18 billion in revenue last year.
A Google representative wasn't immediately available for comment.
Wednesday's penalty represents just over 1% of Microsoft's annual revenue and could have been higher had the company
not fully cooperated with the regulators, Mr. Almunia said. The gravity and the duration of the infringement had also
been taken into account in setting the sum, he said. "The level of the fine has been reduced because I consider as a
mitigating circumstance the good cooperation of Microsoft," he said.
Whereas there are clear guidelines for antitrust violations, the EU doesn't have rules for how it calculates
noncompliance fines of the kind imposed on Microsoft.
Including Wednesday's penalty, Microsoft has been fined EUR2.2 billion--more than any other company--by the European
Commission over the past decade.
Write to Vanessa Mock at firstname.lastname@example.org
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