Microsoft could face
billions in new fines over browser choice
EU's chief antitrust regulator
promises sanctions because Microsoft left browser ballot out of Windows 7 SP1
By Gregg Keizer
July 17, 2012 12:12 PM
Computerworld - European
Union (EU) antitrust regulators today threatened Microsoft with more fines,
potentially massive ones in the billions of dollars, after the company failed
to make good on its promise to offer consumers there a choice of browsers.
The EU's chief regulator,
Joaquin Almunia, talked tough. "If the facts are confirmed, [I will] use
the legal instruments at my disposal to deter and to punish [Microsoft]."
In announcing the new
investigation, Almunia, the head of the EU's Competition Commission, added,
"If confirmed, this would have severe consequences ... and there will be
sanctions."
Microsoft immediately
apologized, calling the failure to offer the browser choice screen to Windows 7
users a "technical error."
The browser ballot was the
result of a deal Microsoft struck with the Competition Commission in late 2009
after officials launched an investigation after a complaint from Norwegian
browser maker Opera Software. Opera accused Microsoft of manipulating the
battle for browser share by tying Internet Explorer (IE) to Windows.
Opera applauded the new
investigation. "We welcome the fact that the EU Commission is willing to
take measures to make sure Microsoft lives up to its commitments from
2009," a company spokesman said in an email.
The settlement required
Microsoft to display a screen in Windows that provided download links to other
browsers, including Apple's Safari, Google's Chrome, Mozilla's Firefox and
Opera Software's Opera. The same browser ballot must appear in Windows 8, the
upgrade slated to ship in October.
According to Almunia,
Microsoft dropped the ball. "It appears that since the launch of Windows 7
Service Pack 1 the choice screen has not been displayed," Almunia said at
a news conference in Brussels Tuesday morning.
Microsoft launched Windows
7 Service Pack 1, or SP1, the first major upgrade to the 2009 operating system,
in February 2011.
Almunia claimed that as
many as 28 million Europeans had been denied the browser choice screen because
of Microsoft's blunder.
In a statement of its own,
Microsoft claimed the omission was an oversight.
"Due to a technical
error, we missed delivering the BCS [browser choice screen] software to PCs
that came with the Service Pack 1 update to Windows 7," the company said.
"We learned recently that we've missed serving the BCS software to the
roughly 28 million PCs running Windows 7 SP1."
Microsoft also downplayed
the problem, noting that users running other editions of Windows, including
Windows XP, Vista and the original version of Windows 7, received the browser
ballot correctly. "We estimate that the BCS software was properly
distributed to about 90% of the PCs that should have received it," said
Microsoft.
Although Almunia said
nothing about the Competition Commission's take on Microsoft's explanation, he
did say that while he prefers settling with companies accused of antitrust
violations rather than go through the lengthy process of filing formal charges,
that only worked if deals are religiously adhered to.
"This can only work
if companies implement these [settlements] fully," he said.
He also said that as
recently as December 2011, when Microsoft last filed a required compliance
report with his agency, the company maintained all was well.
When informed on July 2 of
the missing browser ballot, Microsoft crafted a fix, tested it, then began
pushing it to Windows 7 SP1 users on July 3. The update should reach all
affected EU users by the end of this week, Microsoft said.
The Redmond, Wash.
developer has also hired an outside legal firm to conduct an investigation into
how the technical error, as it described it, occurred. The lawyers' report will
be forwarded to Almunia's agency when it is completed.
Under EU law, the
Competition commission can levy fines as high as 10% of a company's annual
revenue, putting Microsoft's potential liability at an astounding $8.9 billion.
Microsoft's global revenue for the five quarters starting Jan. 1, 2009, totaled
$89.5 billion. If only the last four quarters -- starting April 1, 2011 -- were
considered, the fine could still reach $7.3 billion, based on Microsoft's
revenue during those 12 months of $73 billion.
Almunia was especially
concerned at the repeat nature of Microsoft's offense, and said that would be
taken into consideration if or when a fine was decided. "Non-compliance
with an Article 9 commitment has never occurred in the past," said
Almunia, referring to promises companies make when they settle with the EU
prior to formal charges being filed. "This is the first time that this has
occurred."
He may have been accurate
about settlement commitments, but Microsoft has actually been punished before
for not following orders to the EU's satisfaction.
Four years ago, Microsoft
was fined $1.3 billion when the EU said the company thumbed its nose at an
earlier ruling by continuing to charge an "unreasonable price" for
licensed Windows' communication protocols. Last month, Microsoft lost its
appeal of that fine when a EU court confirmed the punishment even as it reduced
the fine by 4%.
Gregg Keizer covers
Microsoft, security issues, Apple, Web browsers and general technology breaking
news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's
RSS feed . His email address is gkeizer@computerworld.com.
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