Microsoft risks $7bn fine after browser ballot failure

Microsoft could face a fine of up to 10 percent of its annual revenue after admitting failure to implement an EC antitrust browser commitment
Written by Tom Espiner, Contributor

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."

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