March 7, 2013 in Business

EU punishes Microsoft for violating agreement

Company must pay $733 million for failing to give browser option
Associated Press
 
Associated Press photo

Microsoft Corp. retail store employees and guests mingle at a pop-up Microsoft Store during Microsoft’s annual meeting of shareholders in Bellevue last year.
(Full-size photo)

AMSTERDAM – The European Union has fined Microsoft $733 million for breaking a pledge to offer personal computer users a choice of Internet browsers when they install the company’s flagship Windows operating system.

The penalty imposed by the EU’s executive arm, the Commission, is a first for Brussels: No company has ever failed to keep its end of a bargain with EU authorities before.

In 2009, Microsoft Corp. struck a broad settlement with the Commission to resolve disputes over the company’s abuse of the dominance of Windows, which had spanned more than a decade.

Back then, the company agreed to pay about $1.1 billion and promised to give Windows users the option of choosing another browser rather than having Microsoft’s Internet Explorer automatically installed on their machines.

But Microsoft failed to stick to the deal for some 15 million installations of Windows 7 software in Europe from May 2011 until July 2012. The company admitted the failure last year, adding that it was a mistake.

The Commission’s top competition regulator, Joaquin Almunia, said at a press conference in Brussels on Wednesday that the fine reflected the size of the violation and the length of time it went on for. It was also intended to make an example of Microsoft and deter other companies from doing same thing. In theory, the commission could have fined Microsoft up to 10 percent of its global annual sales during the period the violation took place.

“A failure to comply is a very serious infringement that must be sanctioned accordingly,” Almunia said.

Keith Hylton, a professor of law and antitrust specialist at Boston University, said the fine was “far in excess of any benefit Microsoft could have gotten from the error, and vastly in excess of any harm to EU consumers, who are all aware of alternatives to Internet Explorer.”

In all, Microsoft has now paid nearly $3 billion in fines to the Commission since 1998, when regulators opened their first investigations into the company after Sun Microsystems complained it had been denied access to technical documents. Over the years, the EU has broadened its investigation to include whether Microsoft had abused Window’s near-monopoly over the market for computer operating systems to corner other markets, including server software, streaming media software and Internet browsers.

Anthony Sabino, an antitrust lawyer and professor at St. John’s University, said the Commission was right to fine Microsoft for the latest lapse, but the size of the penalty seemed “disproportionate … perhaps even petty, given that Microsoft has paid its fines and yielded to all the demands of the EU.”

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