Microsoft was fined 561 million euros ($732 million) Wednesday for a "serious infringement" of its agreement with European Union antitrust regulators.
"Today, the commission adopted a decision sanctioning Microsoft for its failure to comply with the legally binding commitments which it made to the commission," said Joaquin Almunia, vice president of the European Commission and the commissioner responsible for its competition policies, at a Wednesday press conference in Brussels.
Specifically, Microsoft was sanctioned for breaking an agreement that it made with the European Commission, which is the executive body of the European Union, in response to EU antitrust concerns over Microsoft tying its Windows operating system to its Internet Explorer browser. In 2009, the products respectively commanded 90% of the operating system market share in Europe and 55% of the browser market.
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To settle those antitrust concerns, Microsoft in December 2009 agreed that until 2014, it would create a "choice screen" in Windows for European users, which would allow them to select the browser they wanted. According to EU officials, between March and November 2010, people downloaded 84 million browsers via the choice screen.
But the Wednesday fine against Microsoft was triggered by the company dropping the browser-choice screen in later versions of Windows. "Although Microsoft did make the choice screen available in March 2010, the choice screen was not rolled out as required following the launch of Windows 7 Service Pack 1 in May 2011," said Almunia. "As a consequence, during more than a year, until July 2012, around 15.3 million users did not see the choice screen as they should have."
Almunia said the steep fine -- which under EU law could have been up to 10% of Microsoft's annual revenue, meaning $7.4 billion -- reflected both the gravity of Microsoft's offense and its duration, but was also meant to serve as a deterrent to other businesses. "If companies agree to offer commitments which then become legally binding, they must do what they have committed to do or face the consequences -- namely, the imposition of sanctions," he said.
A statement issued Wednesday by Microsoft said the company took full responsibility for failing to continue offering a browser-choice screen in Windows, and said a technical problem was to blame for the lapse. "We take full responsibility for the technical error that caused this problem and have apologized for it," read Microsoft's 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."
The EU's approach to consumer protection mirrors that practiced by the Federal Trade Commission, which lacks the power to fine first-time offenders. Instead, the FTC seeks legally binding settlements in which the alleged offenders agree to discontinue their violations of consumer protection laws.
Likewise, rather than levying fines, the European Union often first seeks legally binding commitments from a company to alter its regulation-infringing ways. Such was the approach with Microsoft, and Almunia said it had led to the desired effect: increased competition in the Web browser market. "Of course, the browser market has evolved a lot since then -- and fortunately so," he said. "Users can now easily choose, download and install the browser they prefer, which was precisely the objective of the commission. Easy access to different browsers encourages companies to continue to innovate to provide users with the best products."
Irrespective of the effect that the EU's antitrust action had on the browser market, there's clearly been a browser renaissance in recent years, with Google's Chrome, Mozilla's Firefox, and Apple's Safari now providing strong competition against IE in terms of features, security and reliability.
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