Microsoft fined $731m by EU in browser choice screw-up

Microsoft fined $731m by EU in browser choice screw-up

Summary: EU authorities have hit Microsoft with yet another fine, after falling foul of previous antitrust commitments, showing that if you're operating in Europe, you must abide by its rules.

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TOPICS: Microsoft, Browser, EU
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Microsoft is to learn the hard way that "a deal is a deal," at least in the eyes of the European Union, by being forced to swallow a massive fine for breaching earlier promises made with the 27 member state bloc.

browser-ballot-eu-zaw2
An earlier EU settlement led to the "browser ballot" screen.
(Image: Microsoft)

The software giant has been fined €561 million ($731m) by European authorities for falling foul of previous antitrust settlement conditions.

The software giant breached a settlement that it signed with the European Commission in 2009, which mandated that it display a "browser choice" screen on all existing and new PCs in the region.

Europe's antitrust and competition chief Joaquin Almunia stressed the importance of maintaining the legally binding commitments.

"In 2009, we closed our investigation about a suspected abuse of dominant position by Microsoft due to the tying of Internet Explorer to Windows by accepting commitments offered by the company."

He added: "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. Of course, such decisions require strict compliance. A failure to comply is a very serious infringement that must be sanctioned accordingly."

"A failure to comply is a very serious infringement that must be sanctioned accordingly" — European Competition Commissioner Joaquin Almunia

A Microsoft spokesperson in Brussels said in an email to ZDNet that the company takes "full responsibility for the technical error." He added:

"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 it will not appeal the fine.

But the "browser choice" screen was left out of new machines running Windows 7 (Service Pack 1) between February 2011 and July 2012. Microsoft said at the time that it had "fallen short in its responsibility" by failing to dish out the choice screen to some 28 million PCs running Windows in Europe. 

Today, the European Commission rounded down that figure to 15 million Windows users.

Admitting to its mistake, and adding that it would "comply immediately" with the European authorities, the software giant knew it would face an all but inevitable fine for failing to include the settlement-assured "browser choice" screen.

Almunia said at the time that Microsoft "should expect sanctions," and that the commission would treat the case "as a matter of priority."

Microsoft could have been forced to pay up to a maximum of 10 percent of its global annual turnover during its infringing years, notably 2012, which would total as much as $7.4 billion.

Contributing factors, such as Microsoft's early admission and immediate steps to counter the issue, led to the considerably lower fine of more than 9 percent of that total.

"In the calculation of the fine the Commission took into account the gravity and duration of the infringement, the need to ensure a deterrent effect of the fine and, as a mitigating circumstance, the fact that Microsoft has cooperated with the Commission and provided information which helped the Commission to investigate the matter efficiently," the Commission said.

Microsoft comes clean, apologizes; "will comply" with EU

In July, the European Commission said it had received complaints that Microsoft was not carrying out its obligation to provide users with a choice of browser. The EU swiftly opened an investigation into the software giant's alleged oversight.

Microsoft came clean in an almost-immediate public statement that it had failed to offer the browser ballot screen since February 2011 because a "technical error" led to the browser choice update not being included in the store-shelf version of Windows 7 (Service Pack 1).

"While we believed when we filed our most recent compliance report in December 2011 that we were distributing the [browser ballot] software to all relevant PCs as required, we learned recently that we've missed serving the [browser ballot] software to the roughly 28 million PCs running Windows 7 SP1," the company said at the time.

A rare move for any company facing heavy financial penalties from a governmental body, Microsoft said in a statement that it "sincerely apologizes for this mistake."

In "personal talks" with Microsoft chief executive Steve Ballmer, Almunia said that he had "given [him] assurances that [Microsoft] will comply immediately, regardless of the conclusion of the [antitrust] probe."

Following this, even before the release of the next-generation operating system's launch, Windows 8 had a pre-release update added to include the "browser choice" screen, ready for when buyers installed the software on new or existing PCs.

Executives at the company also saw their overall pay dinged as a result of the debacle.

When Microsoft released its fiscal 2012 report, it showed that as a result of the "browser choice" failing within the company's Windows engineering team, former Windows president Steven Sinofsky — who has since left the company — saw his incentive pay for the year cut.

Breach of previous settlement eclipses earlier fines

In 2009, Microsoft avoided a similar up-to-10-percent fine after the firm settled with European authorities. The software maker was accused of unfairly using its operating system monopoly to increase its browser share by bundling Internet Explorer with Windows.

In avoiding the fine, Microsoft agreed to change its business practices by giving its European users a choice of browser. In doing so, it allowed users the option of using various browsers from rival companies, including its own Internet Explorer.

The browser ballot was to remain in place until 2014, and be incorporated in next-generation versions of Windows, including the six-months-old Windows 8.

Today's fine adds to a long list of fines previously dished out by Europe in the last five years over a series of similar events.

In 2008, the company was fined €899 million ($1.44bn) in penalties for failing to comply with a March 2004 antitrust decision, which originally forced Microsoft to create a Windows XP "N" version for European citizens that removed Windows Media Player from the desktop software to allow for competition.

This alone was the largest fine in EU competition policy history until 2009, when Intel took an even larger fine in a separate antitrust suit.

Eventually, this figure was lowered by the European General Court to €860 million ($1.06bn) after Microsoft appealed the case. However, even with this, Microsoft has now racked up a total of around €2.16 billion ($2.81bn) in total over the past decade.

Mozilla: Lack of "browser choice" hit Firefox downloads

After the news broke that the EU would investigate the software giant, rival browser maker Mozilla said that Microsoft's failure to include a "browser choice" may have lost Mozilla as many as 9 million downloads in total.

According to Mozilla vice-president of business affairs and general counsel Harvey Anderson, "After accounting for the aggregate impact on all the browser vendors, it seems like this technical glitch decreased downloads and diminished the effectiveness of the remedy ordered in the 2009 commitments."

During the period of time in which the "browser choice" screen was not included in the latest version of Windows 7 (Service Pack 1), rival browser maker Mozilla saw a significant and prolonged dip in downloads.

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Lost downloads by Mozilla as a result of the failure to include the "browser choice" screen in Windows 7's latest update.
(Image: Mozilla)

During the 2009 settlement with the European Commission, Mozilla's Firefox browser was one of the top browsers on the market, but it still had a significantly lower market share than Internet Explorer as a result of Microsoft bundling the browser with Windows.

And for Mozilla, a non-profit foundation that generates a good proportion of its revenue from bundling Google search services with its browser, continued development is supported by financing revenue-generating deals with partners.

The EU said today that until November 2010, 84 million browsers were downloaded through the "browser choice" screen, stressing its importance.

Mozilla generates around $300 million per year from Google to keep its web search on the Firefox starting screen and as the browser's default search engine.

Update at 7:15 a.m. ET: with comment from Microsoft.

Topics: Microsoft, Browser, EU

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132 comments
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  • EU is run by mafia

    No wonder that land is run to the ground by the criminals.
    LBiege
    • As the article states, it's not a land...

      And to be honest, Microsoft made a stupid mistake by going against legal agreements (which are aimed at protecting consumers from monopolies).
      A better question would be: are they ever going to look at app store policies with their lock-in pricing?
      Carst
      • Probably, but I hope not

        Since Europe is a bunch of Socialists, it wouldn't surprise me if they tried to tell Microsoft how to set app store prices, but people who understand and believe in freedom would not tolerate that.
        FDanconia
        • You should refrain from words whose definition you CLEARLY do not know

          .DeusExMachina.
          • Definition(s)

            To which words are you referring?
            Jimfadden
          • Socialist

            .DeusExMachina.
      • Mistake?

        Probably one of the reasons the fine is so high is becasue the court did not accept this was a mistake -or software glitch as someone has dismissed the event.

        For years MS maintained its browser monopoly by a) claiming the browser was integral to the O/S and could not easily be decoupled. b) putting code in the O/S which checked for browser type and just by coincidence the non MS browser's kept facing a series of problems.

        The courts maybe took the view that MS had sought to deliberately miss out what would have been quite large chunks of code through the OS as part of the browser option requirements rather than just making a single accidental error.
        martin23
        • That tired old argument again?

          Anyone who wants another browser can easily get one, and IE's market share trend shows that many people have done just that.

          My cable company has a monopoly, as they're the only company to offer cable where I live. Ditto for my phone company. And my power company.

          But when it comes to browsers, Microsoft doesn't have anything like monopoly power.
          ParrotHead_FL
          • Deals are deals

            Microsoft was NOT fined for IE but THEY WAS FINED FOR NOT COMPLYING TO A DEAL the fact that the deal was about IE is totally irrelevant

            If an european union based company struck a deal with US federal government and then breached it wouldn't them be fined?? more important if that deal was for lowering previous fines wouldn't your government get little cross?
            Filippo Savi
          • No but not all monopolies are the same

            Simply because something is a monopoly does not make it wrong and does not mean you will be overcharged. Some monopoles are regulated to stop abuses and some monopolies are stopped to prevent further abuses. MS was fined in both the US and Europe because the courts concluded MS abused its position.

            For many years it was not a simple choice of being able to change browsers. Many large corporate and government sites would only work with IE and you could only use IE with a number of MS's other products to develop corporate solutions.

            The MS browser monopoly began to break down some time ago -as the result of the court actions - and has now gone but the courts decision reflects MS historic behaviour not the market today. MS committed to do something it then ignored and has paid the price.
            martin23
          • Culpability

            "For many years it was not a simple choice of being able to change browsers."

            Not Microsoft's fault.


            "Many large corporate and government sites would only work with IE..."

            Not Microsoft's fault.


            "The MS browser monopoly began to break down some time ago -as the result of the court actions..."

            Or possibly a result of other people making better browsers.
            ParrotHead_FL
          • Knowing what you're talking about

            "'For many years it was not a simple choice of being able to change browsers.'

            Not Microsoft's fault."

            Uh, yes, it was. The designed IE and Windows in such a way that removing IE was difficult if not impossible for the average user. In addition, they went out of their way to break standards to drive web development to IE-only web pages.
            You are just simply misinformed.

            "'Many large corporate and government sites would only work with IE...'

            Not Microsoft's fault."

            And again, yes it was. They specifically broke standards to force IE-only development, after driving hard into these markets.

            "'The MS browser monopoly began to break down some time ago -as the result of the court actions...'

            Or possibly a result of other people making better browsers."

            And AGAIN, no. First, other browsers existed long before IE. IE was actually late to the party, since Bill Gates, who was never particularly good at predicting technology, estimated the internet as "going nowhere." When NetScape nee Mosaic came out of nowhere, and made him a fool, to his credit, he was able to right the ship and turn it around. And at the time of IE one, EVERY browser was better. In fact, it could easily be argued that IE was never the better browser. But while that is debatable, finding anyone who claims that the original versions of IE were technologically superior will be an exercise in frustration and futility.
            .DeusExMachina.
          • Really??? Provide proof please.

            If you are going to make such sweeping statements as the one below, you should provide some verifiable proof. As someone involved in very large corporate websites, I believe I would have been aware if anyone was forcing a policy upon me.

            - - - - - - - - - - - - - -

            'Many large corporate and government sites would only work with IE...'

            Not Microsoft's fault."

            And again, yes it was. They specifically broke standards to force IE-only development, after driving hard into these markets.
            sys-eng
          • "Forced"

            "They specifically broke standards to force IE-only development..."

            I don't think you understand what the word "force" means.
            ParrotHead_FL
          • Specious Logic

            "The[y] designed IE and Windows in such a way that removing IE was difficult if not impossible for the average user."

            So? This didn't prevent anyone from installing an alternate browser.


            "They specifically broke standards to force IE-only development, after driving hard into these markets."

            You're actually arguing that Microsoft managed to force enterprises to design IE-only websites? That enterprises may not have simply CHOSEN to do this on their own?


            "And at the time of IE one, EVERY browser was better. In fact, it could easily be argued that IE was never the better browser."

            Okay, then--consumers were too dumb to pick the alternatives. But still, they DID have alternatives.
            ParrotHead_FL
          • False false and false

            1) You do not need to uninstall an app to install another competing app.

            2) Microsoft was making IE BEFORE those "standards" were standards... IE was the DEFACTO standard for years. We corp developers were making web apps completely without CSS for years... we didn't need it.

            3) The reasoning for this change was partially Microsoft's fault in that they did not keep up with the pace of innovation in this space and partially because of a lemming mentality by the screeching uncompetitive lynch mobs that were jealous that the PC revolution was synonymous with MICROSOFT.
            ggibson1
          • your cable company is not a monopoly

            Anyone can run a cable to your house, if they agree to bear the costs. This is how competition works. If nobody else runs cables to your house, then you are probably not that interesting as a customer.

            As for Microsoft, the "monopoly" reference is a different one.
            danbi
          • danbi

            In many localities, the cable TV company is a protected monopoly just like the electric power company. Most cities in North Carolina grant an operating license to a single cable TV company to operate in their area. While anyone can run a cable to your house, they may not be able to provide any type of service over that cable or to terminate it at a public road right-of-way.
            sys-eng
          • Granted monopoly

            Correct. An state or another authority can give monopoly concession for a given task to one or more entities. But such monopolies are not unrestricted. You get the monopoly in exchange of promising to perform certain things in certain ways.

            Most important, those monopolies are not tolerated to abuse their position. Having a monopoly is not illegal. Abusing a monopoly is.
            danbi
          • Yes, the cable companies are a monopoly

            They are granted a basic monopoly by various state agreements that prevent people from getting into the business without meeting outrageous pre-conditions.
            Lerianis10