EU Imposes €561 Million ($731 Million) Fine On Microsoft — With Google In Mind

The European Commission has made good on its promise last week to fine Microsoft for failing to continue to offer Web browser choice on its PC software through 2014. The Commission imposed a fine of €561 million ($731 million) for not upholding its agreement to offer alternative Web browsers to Windows users.

In 2009, Microsoft agreed with the Commission to offer a browser “choice screen” (featuring IE, Firefox, Chrome, etc.) on its Windows PC software to enable consumers to make a browser selection and not simply “choose” IE by default. That choice screen reportedly disappeared in February 2011, when the first Windows 7 service pack appeared.

Complaints were filed in 2012 about the matter, and today’s fine is the result of a follow-up European Commission investigation. According to the European Commission press release:

In December 2009, the Commission had made legally binding on Microsoft commitments offered by the US software company to address competition concerns related to the tying of Microsoft’s web browser, Internet Explorer, to its dominant client PC operating system Windows (see IP/09/1941,MEMO/09/558 and MEMO/09/559). Specifically, Microsoft committed to make available for five years (i.e. until 2014) in the European Economic Area a “choice screen” enabling users of the Windows operating system to choose in an informed and unbiased manner which web browser(s) they wanted to install in addition to, or instead of, Microsoft’s web browser . . .

This is the first time that the Commission has had to fine a company for non-compliance with a commitments decision. In the calculation of the fine the Commission took into account the gravity and duration of the infringement, the need to ensure a deterrent effect of the fine and, as a mitigating circumstance, the fact that Microsoft has cooperated with the Commission and provided information which helped the Commission to investigate the matter efficiently.

Since 2009, Microsoft’s IE has lost its position as the world’s top browser (though it remains #1 in the US). The top spot now belongs to Chrome. In Europe, according to StatCounter, Chrome leads the market with 35 percent, Firefox has 29 percent and IE is the third place browser with 24 percent market share.

The Commission asserts that 84 million browsers were downloaded via the choice screen while it existed. However the new, more competitive browser landscape in Europe probably has more to do with market forces (and aggressive Google Chrome promotion) than the choice screen.

Redmond claimed that the disappearance of the choice screen was the result of a “technical error” and has apologized and accepted responsibility. The company could appeal the fine, but apparently won’t, according to a New York Times report.

While there was clearly a violation of Microsoft’s commitment to offer browser choice and the European Commission is simply exercising its authority in enforcing the earlier agreement, there’s an important “symbolic” dimension to the Commission’s fine.

As the market share figures argue, it’s probably unnecessary to continue to enforce the “choice screen” rule. But, the fine and the PR around it today are as much about the European Commission and its decisions being taken seriously as they are about browser market share.

This fine sends the message that the Commission “has teeth” and isn’t afraid to use them. The intended audience for that message is much more Google than Microsoft. The Commission and Google are in the midst of negotiating an antitrust settlement, which may not come until August or later.

This decision and fine are partly intended to put more public pressure on Google during those negotiations.