Microsoft risks $7bn fine after browser ballot failure

Microsoft risks $7bn fine after browser ballot failure

Summary: Microsoft could face a fine of up to 10 percent of its annual revenue after admitting failure to implement an EC antitrust browser commitment

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Microsoft could be fined up to $7bn (£4.5bn) by EU antitrust regulators after it failed to offer a choice of browsers to millions of computer users.

Internet Explorer
Microsoft faces a huge fine from the European Commission for failing to honour the terms of a 2009 agreement on offering browser choice to Windows users. Image credit: CNET News

Under an EU antitrust ruling in 2009, Microsoft agreed to offer a choice of browsers on new PCs via a ballot screen, in order to minimise the effects of Internet Explorer being bundled with Windows. However, it admitted on Tuesday that it had not offered a browser choice on 28 million European machines running Windows 7 Service Pack 1, which was rolled out in July 2010.

Under the 2009 ruling, Microsoft is liable to pay up to 10 percent of its annual gross revenue should it fail to offer the browser ballot. Last year, Microsoft's turnover was $69bn (£44bn), meaning a fine could run up to almost $7bn.

According to Alan Davis, competition partner at law firm Pinsent Masons, Microsoft's failure to offer the ballot is something of a landmark.

"The Commission is now able to impose huge fines of up to 10 percent of Microsoft's turnover — potentially up to $7bn," Davis said in a statement on Wednesday. "This is the first time that a commitment has been broken by a company in this position."

Choice of browsers

Under the 2009 agreement, European users were supposed to be offered a choice of Microsoft's major competitors. Browsers including Firefox, Chrome and Opera were to be made available to users of Windows XP, Windows Vista and Windows 7 for five years, via the Windows Update mechanism.

The Commission is now investigating Microsoft over the failure to offer the browser ballot on Windows 7 Service Pack 1 machines. It has yet to provide a timescale for when it will reach a decision about whether to impose a fine, however.

Microsoft failed to offer the browser choice screen for Windows 7 SP1 users due to a technical fault, the company said on Tuesday. The technical fault was not picked up during a Microsoft browser compliance audit, which was filed in December 2011.

Failure to monitor whether it was compliant with the 2009 agreement may make a fine for Microsoft more likely, said Davis.

"Given the resources available to Microsoft to monitor its compliance with the commitment, the Commission is unlikely to have much sympathy for their arguments that this was a mistake or a technical glitch," he said.

"Microsoft will have an uphill battle to persuade the Commission that fines shouldn't be imposed as the Commission will also want to send out a deterrence message to other companies about how seriously they take compliance with commitments."

Not just a screen

A legal expert from Mozilla, which oversees development of IE competitor Firefox, said that other elements of the 2009 settlement are of equal importance to the browser choice screen.

"We support the European Commission's efforts to ensure compliance with the 2009 commitments adopted by Microsoft, and feel it is premature to form any conclusion until the EC has completed its inquiry and gathered all of the facts," Mozilla general counsel Harvey Anderson said in a statement.

"In 2009, Mozilla outlined a series of principles regarding user choice as a critical part of any remedy. While the ballot screen was one means to promote user choice, Microsoft's pledge in the settlement to adopt pro-choice behaviours was, and still is, equally important."

Topics: Microsoft, Browser, EU, Windows

Tom Espiner

About Tom Espiner

Tom is a technology reporter for ZDNet.com. He covers the security beat, writing about everything from hacking and cybercrime to threats and mitigation. He also focuses on open source and emerging technologies, all the while trying to cut through greenwash.

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151 comments
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  • Fed up of this and the EU - it's damaging for consumers

    Browsers are boring. took the EU long enough to pick up on it. if it was important enough they'd have 'noticed' sooner. Too busy subsidizing french farmers, etc. now they see a way out of the Greek/Spain crisis.
    TechsUK
    • +1 Here

      Well said.
      TheCyberKnight
      • Banning browser bundling is BS

        What have these socialist nuts shaped the world into, really? MSFT wanted their Windows to be more attractive so they bundled a browser in it, which would benefit the end users as well. It's a win-win, right?

        "No, no, no," says the politicians. "It's illegal if you provide customers more functionality. It breaks laws if you improve the quality of your products. It's a crime if you make your products more appealing. We the politicians understand that customers would prefer a Netscape browser at 40$/each to a free IE. Why? Because we say so. It's thus MSFT's duty to dumb their Windows down so loser companies like Netscape and Opera can compete."
        LBiege
        • Spoken like a true retard

          If you want choice then you don't want a monopoly. Which is the definition of Windows for the most part.
          GoPower
          • Spot on!

            These NBM trolls and fanatics want all Microsoft's competitors to disappear. Just great. That way, anyone who doesn't like paying for MS products wouldn't have a choice, and MS wouldn't have to make any improvements to the product other than jacking up the price to Adobe levels.

            I can hardly wait!
            non-sycophant
          • Sounds like someone is bitter

            Complain to Apple to lower their prices or offer cheaper models. The issue isn't Microsoft having a monopoly, it's that there are no good options for a full-fledged computer in the $400 range other than a Windows-based machine. Linux-based systems never pick up steam for the same reason Windows Phone is struggling- relatively small app base (compared to Windows / OS X) and not enough exposure.

            It's simple economics. Why did the iPad enjoy like a 90% market share until the $199 7" tablets showed up? The only solution people had was the iPad. Now they have a much less expensive option and numbers have eaten away dramatically at the iPad lead.

            Ask Samsung how well their overpriced-for-the-features Chromebooks are selling...
            ikissfutebol
          • This is basically wrong in many ways

            Your argument seems basically to be that the issue isn't with Microsoft bundling IE with Windows, but in the lack of good browser alternatives. (a.k.a. markets auto-regulate themselves, products lose in popularity when better alternative come up.)

            One question : On what planet are you living on? You have one, big live PROOF that this isn't true, which is the very thing we are talking about here : Browser. EI undeniably sucks BIG TIME and sure has a bigger share of the market than it deserves. How to explain that? Monopoly. (Because auto-regulating markets require people to be knowledgeable, which they are not.)
            Death to Stupid
        • GoPower!

          Let these corporate shills know we aren't swallowing any of their monopoly bullsh!t.\\

          +1
          CaviarBlack
        • Can't dumb down windows anymore than the rock bottom that it is

          So LBiege, you have a problem clicking ONCE on a ballot page, only when starting a PC for the first time, in order to choose your browser. If that is dumbing down windows, then lets hope for a quick demise when 8 comes out. The EC is not really concerned about which browser you use; they are concerned that there would be much less competition for IE and thus less innovation. BTW Mighty Soft was only looking at the ad revenue and the ability to direct searches (top listings) to the companies that pay them for the service. MS has never been about innovation and is more about buy & shut down and to a lesser degree buy & assimilate. I know that many people (probably over half of the US population) that use a computer without knowing much about how to effectively operate it. If you don't give them options they will stick with what is provided. When MS controls the market, innovation slows to a crawl and it takes other companies to be creative.
          Jesster
        • MS non-compliance

          On the subject of choice, our ECDL should be renamed MSCDL, as all courses that I have seen are run specifically on MS products, rather than giving an overview of computers and the OS and app choices.
          ShaneK
        • Your liberal utopia

          Don't you hate it when real life evidences prove that your liberal free-market utopia is an utopia?
          Must suck to be confronted to the reality that in real life, free-markets cannot regulate themselves, because free-markets foster tons of cases of unfair competition (through monopoly and other dirty tactics) just like this one... which also happen to stifle innovation and advancement (all the resources in web development wasted to make websites IE compatible because IE doesn't comply with standards...)
          Death to Stupid
  • Ridiculous

    It's noteworthy that neither iOS or Android have a "browser choice" screen, when these operating systems are developed by two of the most vocal among the lobbyists who achieved the original result at the EU. Google presented its self as the hero, a neutral party acting purely in the public interest, but of course as soon as they succeeded at the EU the corporation announced that it would be launching its own rival browser.

    The notion that users need a special prompt to encourage them to go and download a free web browser to use instead of the default web browser is utter nonsense. The architects of this nonsense know it, as unambiguously demonstrated by the lack of such a feature in their own OSs (launched after the original EU ruling).

    The EU is arguably the most bloated and corrupt institution in the history of human civilization. It's also undemocratic, yet it has power over democratic governments. Perhaps some ageing corrupt heavily-lobbied over-paid suits in the EU thought it sounded like a good idea, and perhaps a white-haired European judge would agree, but these Euro-buffoons are not the average user.
    Tim Acheson
    • Bailing out EU with MS fines?

      So this is how they are going to bolster the Euro!
      William_Collins
    • It is a pity...

      "The EU is arguably the most bloated and corrupt institution in the history of human civilization."

      While your first paragraph is interesting and valid, it is a shame to find this nonsense in your second. I do not understand why an intelligent man(?) like you is so busy undermining his reputation.

      If you call the EU "bloated", OK. If you would have called them "incompetent", fine with me. But the claim of corruption would need evidence, something that you do not provide.

      Sad that you devalue your contribution so much.
      oliver6
      • @oliver@...

        Um... do you live in the same Europe as me? The EU is as corrupt as anywhere else and then some - expenses scandals, gambling with sovereign debt, propping up countries such as Ireland (who proclaimed themselves the Celtic Tiger) with other peoples money - against the peoples wishes. What exactly DO you call corrupt?

        These guys have HORDES of consultants and advisors, they discuss everything in a forum with hundreds of other delegates, from different backgrounds and countries. People at this level do not make 'mistakes' (it would be almost impossible even for a compelte idiot) and that you would attribute them with 'incompetence' only suits them quite nicely. If a person on the street could see this mess happening 10-15 years ago, then what are the chances that government officials with all of the above could fail so miserably?

        Anyone who believes such nonsense has no business questioning another persons intelligence.
        12312332123
    • Android does have a choice screen in ICS

      Go to Settings -> App Associations & select "Open Web URLs with"
      illdini
      • So does Windows

        Internet -> your favorite browser web site -> download -> joy
        jgoode1
        • But none of the others bundled

          With their own icon pre-loaded on the desktop.

          No choice there.
          CaviarBlack
          • iOS comes bundles with Safari

            As an IT person that used MS products but also uses an iPhone and iPad, both my Apple devices came bundled with Safari. Where's the argument here that MS has to play by a different set of rules?
            larryb43
          • Easy answer to that question

            Neither Apple nor Google have been found to be predatory monopolies. Microsoft was. Viva la difference.
            springerj