Microsoft Fined $731 Million by EU Over Browser Accord

Microsoft Corp. (MSFT) was fined 561 million euros ($731 million) by European Union regulators for violating the terms of a settlement to give users a choice of web browsers aside from its Internet Explorer.

Today’s fine -- about 1 percent of the company’s 2012 revenues -- brings to 2.24 billion euros the penalties imposed on Microsoft in its EU antitrust clashes over the past decade, including an initial 899 million-euro fine for failing to obey an order to share data with competitors.

The world’s largest software maker agreed in 2009 to offer access to other browsers as a part of a settlement to repair its relationship with the bloc’s regulators. The company said last July it only learned that month that it didn’t offer its browser choice software on some 28 million computers running Windows 7 Service Pack 1, or 10 percent of the computers that should have received it.

“This is a big fine, but it’s a big company and a sophisticated company that made a commitment and they failed to honor it,” said Charles Whiddington, a lawyer at Field Fisher Waterhouse LLP in London. “Commitments are really important to the commission because they lubricate the efficiency of its policing of the rules.”

Microsoft took “full responsibility for the technical error that caused this problem and have apologized for it,” the company said in an e-mailed statement.

‘Candid Assessment’

“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.

The Redmond, Washington-based company fell 1.3 percent to $27.98 at 12:02 p.m. in New York.

Microsoft Chief Executive Officer Steve Ballmer’s yearly bonus was cut last year to $620,000, partly as a result of the company’s browser problems with the EU and also due to the disappointing performance of its online services unit.

Microsoft ended more than 10 years of EU antitrust investigations with its 2009 pledge to give consumers who bought personal computers using its software a choice of the 12 most widely used browsers to install in addition to, or instead of, Internet Explorer. The company told regulators in December 2011 that it was complying with its commitment to display a browser- choice screen to Windows operating system users. The new fine marks the first time a company has been sanctioned for failing to stick to the terms of a legally binding settlement.

Think Twice

EU Competition Commissioner Joaquin Almunia said regulators were “more naive than today” in letting Microsoft monitor its own compliance. In the future, the EU will detail what they expect from a trustee appointed to monitor a settlement and check reports more carefully, he said.

“I hope this decision will make companies think twice,” Almunia told reporters today. “We trusted in the reports about the compliance.”

Google Inc. (GOOG) is negotiating its own settlement with EU regulators to end a probe into claims it discriminates against competitors in its search results. Microsoft, the operator of the Bing search engine, is one of several companies that have complained about Google’s behavior. Almunia said last month that an accord could be finalized later this year.

Fourth Penalty

The penalty is the fourth levied on Microsoft since it was fined 497 million euros in 2004 for abusing its position as the world’s largest supplier of desktop software to hinder rivals for server and media programs. It was fined 280.5 million euros in 2006 and another 899 million euros in 2008 for not supplying interoperability information to server rivals on fair terms.

The 899 million-euro penalty was reduced to 860 million euros by the EU’s General Court last year. That fine is only exceeded by a 1.06 billion-euro sanction against Intel Corp. which is also being challenged in court.

Mozilla Corp. General Counsel Harvey Anderson said in an October blog post that daily downloads of his company’s Firefox browser fell by 63 percent prior to Microsoft fixing the browser-choice issue and that the company may have lost as many as 9 million potential downloads as a result of the glitch.

Microsoft was also warned by the EU last year to modify how it presents Internet Explorer in Windows 8 to avert another antitrust clash.

Google’s Chrome was the most popular web browser globally in February, with 37 percent of market share, according to statistics from web analytics firm StatCounter. Microsoft’s Internet Explorer followed with 30 percent, while Mozilla’s Firefox accounted for just over a fifth of users.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.

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