EU fines Microsoft for breaking browser choice deal

Microsoft to pay $731 million for failure to comply with 2009 agreement to allow users more options

Microsoft is facing a stiff fine from the European Union, following the company's failure to live up to its end of a 2009 agreement that would have given Windows users a choices to install multiple browsers.

The European Commission is fining Microsoft €561 million, or $731 million for breaking its end of the deal, it was announced Wednesday. 

The fine represents a little less than 1% of Microsoft's $73.72 billion revenue for the 2012 fiscal year ending June 30, 2012. In September, it was reported that the EU was possibly going to charge the company up to $7.4 billion, or 10% of the full year revenue. 

The Commission noted that this is the first time that it has ever had to fine a company for non-compliance and that the “the gravity and duration of the infringement” were taken into account when it was calculating size of the fine.

This case stems from an agreement between the EU and Microsoft from December 2009, in which Microsoft agreed to give users a “Browser Choice Screen" which would allow user to pick from up to 12 browsers. In return the EU said that it would drop antitrust charges against the company. Microsoft was to make the Choice Screen available to users for five years.

The Browser Choice screen was made available to Windows users from March 2010 until November 2010, during which time the Commission says that 84 million browsers were downloaded via the screen. But with the debut of the Windows 7 service pack 1 in February 2011, Microsoft stopped offering the Choice Screen, leading to the Commission opening up an investigation in July to see if Microsoft had complied with its end of the deal.

Microsoft admitted in a statement on its blog in July 2012 that the company had “fallen short in our responsibility" to offer the Choice Screen to its users. 

“Due to a technical error, we missed delivering the BCS software to PCs that came with the service pack 1 update to Windows 7. The BCS software has been delivered as it should have been to PCs running the original version of Windows 7, as well as the relevant versions of Windows XP and Windows Vista. However, while we believed when we filed our most recent compliance report in December 2011 that we were distributing the BCS software to all relevant PCs as required, we learned recently that we’ve missed serving the BCS software to the roughly 28 million PCs running Windows 7 SP1.”

After realizing the error, Microsoft wrote that it went ahead and fixed the problem, started an investigation into how the error occurred, and immediately told the EU Commission.

“Since we have fallen short in our responsibility to display the BCS, we have offered to extend the time during which we are obliged to do so by an additional 15 months. We understand that the Commission will review this matter and determine whether this is an appropriate step for Microsoft to take. We understand that the Commission may decide to impose other sanctions,” Microsoft wrote.

Despite these actions taken by Microsoft, EU Competition Commissioner Joaquin Almunia told reporters in Warsaw in September that formal charges were being prepared against the company. In October the Commission sent a formal complaint to Microsoft, and has now decided to impose a fine. 

"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," Almunia said in a statement Wednesday.

VatorNews reached out to Microsoft, but the company was unavailable for comment at this time.

Microsoft stock is down 1.32% Wednesday, to $27.98 a share.

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