Report: EU to hit Microsoft with 'large fine' Wednesday
European antitrust regulators will slap Microsoft with a “large fine” Wednesday for failing to live up to a 2009 settlement that requires it to offer Windows users a browser ballot, the New York Times reported Tuesday.
According to the newspaper, the European Commission is expected to announce fines tomorrow in the eight-month-old investigation into Microsoft’s omission of a browser choice screen.
The browser ballot was the result of a deal Microsoft struck with the Commission in late 2009 after officials fielded 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.
Regulators agreed, and after some arm twisting, forced 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 browser ballot was to appear in all versions of Windows, including the then-new Windows 7.
But Microsoft dropped the ball: It did not show the browser ballot to users of Windows 7 Service Pack 1 (SP1) for a year-and-a-half, from February 2011, when the service pack debuted, to early July 2012.
Last summer, when the Commission announced it was investigating, Microsoft immediately apologized, but called the failure a “technical error” and blamed the oversight on an engineering team.
Since then, and continuing into October 2012, when the Commission filed formal charges against Microsoft, Joaquin Almunia, the agency’s top official, has talked tough, noting that Microsoft’s behavior was unprecedented and saying, “Companies should be deterred from any temptation to renege on their promises.”
But few believe that the Commission will impose the maximum fine, which under the law could reach nearly $9 billion.
“Given the settlement mentality of the Commission, I wouldn’t expect the maximum,” said Robert Lande, a law professor at the University of Baltimore and director of the American Antitrust Institute. “The Commission has never done 10%, they just don’t do that,” Lande added, referring to the EU’s maximum penalty of 10% of a company’s revenue during the time it is found in violation of the law.
But Lande argued that Almunia should swing a big stick rather than just talk softly to Microsoft.
Calling the $2.5 billion that Microsoft has paid out in fines to the EU “chump change,” Lande made a case that neither those fines, nor the approximately $5 billion Microsoft spent in the U.S. settlement of 2001, were enough to ensure the company toed the line.
“I would urge [the Commission] to impose the maximum fine, because the earlier fines weren’t enough to get Microsoft’s attention,” said Lande.
Lande found it hard to understand why Microsoft’s omission of the browser ballot didn’t surface earlier. “It seems to me absolutely impossible that Google wouldn’t have noticed,” he said. “Google hates Microsoft with a passion, and they’re one of the most sophisticated companies on the planet.”
He also knocked the Commission for its preference to settle with violators, rather than threaten them with the full legal weight of EU antitrust law.
“If you’re negotiating, you start from a position of saying, ‘There’s no chance of settling, even if it takes 20 years,’” said Lande. Instead, the Commission’s expressed preference for settlements — not just with Microsoft but also in the ongoing investigation into Google’s business practices — puts it in a weaker bargaining position.
“By talking settlements, [Almunia’s] implying that he’s a wimp,” said Lande. “At a minimum, you’d have to be at the $5 billion mark to get Microsoft’s attention,” he said, referring to the amount the company spent settling the U.S. case. “And you could argue that even that wasn’t enough to modify Microsoft’s behavior.”
Microsoft declined to comment on the New York Times story, but instead referred to a July 2012 statement in which it acknowledged that it had “fallen short in our responsibility,” but also downplayed the missing ballot and said that as late as December 2011 it believed it was serving the screen to all users.
The latter claim, however, was at odds with a report on the company’s own support site in March 2011, just weeks after the Windows 7 SP1’s debut, that the browser ballot was AWOL. A Microsoft support representative ignored the customer’s report.
The Commission did not respond today to a request for comment.