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Microsoft Faces Fine in Europe After Breaking a Deal Microsoft Faces Fine in Europe After Breaking a Deal
(about 20 hours later)
BRUSSELS — Europe’s antitrust regulators are preparing to deliver a strong message: a deal is a deal, and if a company fails to live up to a settlement agreement, there will be consequences.BRUSSELS — Europe’s antitrust regulators are preparing to deliver a strong message: a deal is a deal, and if a company fails to live up to a settlement agreement, there will be consequences.
On Wednesday, the European Union is expected to impose a large fine on Microsoft for failing to give users of the company’s Windows software a choice of Internet browsers. It would be the first time that European regulators had punished a company for neglecting to comply with the terms of an antitrust settlement, and it could signal a tougher approach to enforcing deals in other antitrust cases, including one involving Google.On Wednesday, the European Union is expected to impose a large fine on Microsoft for failing to give users of the company’s Windows software a choice of Internet browsers. It would be the first time that European regulators had punished a company for neglecting to comply with the terms of an antitrust settlement, and it could signal a tougher approach to enforcing deals in other antitrust cases, including one involving Google.
Microsoft and officials at the European Commission reached an antitrust settlement in 2009 that called on the company to give Windows users in Europe a choice of Web browsers instead of pushing them to Microsoft’s Internet Explorer. But Microsoft failed to offer users such a choice for more than a year — apparently without anyone at the company or the commission noticing.Microsoft and officials at the European Commission reached an antitrust settlement in 2009 that called on the company to give Windows users in Europe a choice of Web browsers instead of pushing them to Microsoft’s Internet Explorer. But Microsoft failed to offer users such a choice for more than a year — apparently without anyone at the company or the commission noticing.
Last July, the company admitted the problem and apologized. It said the failure was a result of a technical issue that had escaped its notice, and it updated its Windows 7 and Windows 8 software to give European users the browser choice.Last July, the company admitted the problem and apologized. It said the failure was a result of a technical issue that had escaped its notice, and it updated its Windows 7 and Windows 8 software to give European users the browser choice.
In October, Europe’s antitrust chief, Joaquín Almunia, charged Microsoft with failing to live up to the agreement.In October, Europe’s antitrust chief, Joaquín Almunia, charged Microsoft with failing to live up to the agreement.
The amount of the fine could not be learned on Tuesday. Mr. Almunia’s office and Microsoft executives declined to comment.The amount of the fine could not be learned on Tuesday. Mr. Almunia’s office and Microsoft executives declined to comment.
The decision to fine Microsoft comes as Mr. Almunia’s office is negotiating with Google to try to resolve the commission’s concerns about that company’s dominance of the Internet search and advertising markets. Even if Google and the commission reach a settlement, a substantial fine for Microsoft would serve as a warning that a company violates such a settlement at its financial peril.The decision to fine Microsoft comes as Mr. Almunia’s office is negotiating with Google to try to resolve the commission’s concerns about that company’s dominance of the Internet search and advertising markets. Even if Google and the commission reach a settlement, a substantial fine for Microsoft would serve as a warning that a company violates such a settlement at its financial peril.
“It’s important for the commission to show it’s serious in this case because this will set a precedent, and because the commission increasingly uses settlements to help reach solutions more quickly, especially in the fast-moving technology sector,” said Nicolas Petit, a professor of competition law and economics at the University of Liège in Belgium.“It’s important for the commission to show it’s serious in this case because this will set a precedent, and because the commission increasingly uses settlements to help reach solutions more quickly, especially in the fast-moving technology sector,” said Nicolas Petit, a professor of competition law and economics at the University of Liège in Belgium.
“The commission also has an incentive to slap on a big fine in this case to ensure that companies, which are hard to monitor, get the message that it will be costly down the road if they get caught defying settlement orders,” Mr. Petit said.“The commission also has an incentive to slap on a big fine in this case to ensure that companies, which are hard to monitor, get the message that it will be costly down the road if they get caught defying settlement orders,” Mr. Petit said.
In theory, Mr. Almunia can levy a fine totaling up to 10 percent of a company’s global annual revenue. In Microsoft’s case that could mean a penalty of $7 billion, but analysts say it is highly unlikely to reach that level.In theory, Mr. Almunia can levy a fine totaling up to 10 percent of a company’s global annual revenue. In Microsoft’s case that could mean a penalty of $7 billion, but analysts say it is highly unlikely to reach that level.
The largest fine ever levied by the European authorities in an antitrust case was 1.1 billion euros, or $1.4 billion, in 2009 against Intel for abusing its dominance in the computer chip market. Intel is still appealing that ruling.The largest fine ever levied by the European authorities in an antitrust case was 1.1 billion euros, or $1.4 billion, in 2009 against Intel for abusing its dominance in the computer chip market. Intel is still appealing that ruling.
Microsoft has paid a long series of fines to European regulators over the past decade.Microsoft has paid a long series of fines to European regulators over the past decade.
In 2008, it was fined nearly 900 million euros in so-called periodic penalties for defying a decision that regulators had imposed on the company.In 2008, it was fined nearly 900 million euros in so-called periodic penalties for defying a decision that regulators had imposed on the company.
The amount was subsequently reduced to 860 million euros after the company appealed to the General Court of the European Union.The amount was subsequently reduced to 860 million euros after the company appealed to the General Court of the European Union.
Microsoft also paid fines of 497 million euros and 281 million euros for separate but related offenses, bringing the total to 1.7 billion euros during its battles so far with European regulators.Microsoft also paid fines of 497 million euros and 281 million euros for separate but related offenses, bringing the total to 1.7 billion euros during its battles so far with European regulators.
Although Microsoft has appealed past punishments, it may be reluctant to do so this time, preferring to focus on its rivalry with Google. Microsoft is among the companies that have complained about Google’s business practices to the commission.Although Microsoft has appealed past punishments, it may be reluctant to do so this time, preferring to focus on its rivalry with Google. Microsoft is among the companies that have complained about Google’s business practices to the commission.
The commission has been formally investigating Google since November 2010.The commission has been formally investigating Google since November 2010.
Mr. Almunia offered the company a settlement in May 2012 after finding that it might have abused its dominance in Internet search and advertising by giving its own products an advantage over those of others, even while maintaining that it offered neutral results.Mr. Almunia offered the company a settlement in May 2012 after finding that it might have abused its dominance in Internet search and advertising by giving its own products an advantage over those of others, even while maintaining that it offered neutral results.
Mr. Almunia and Google have been negotiating since then, and a final agreement may not come until later this year, suggesting that the strategy of seeking quick results in antitrust technology cases through settlements instead of lengthy legal battles could be coming undone.Mr. Almunia and Google have been negotiating since then, and a final agreement may not come until later this year, suggesting that the strategy of seeking quick results in antitrust technology cases through settlements instead of lengthy legal battles could be coming undone.
The commission has taken a tougher line with Google than American regulators did. The Federal Trade Commission decided in January after a 19-month inquiry that Google had not broken antitrust laws. But Mr. Almunia has insisted that Google make changes to the most sensitive area of its business, online search.The commission has taken a tougher line with Google than American regulators did. The Federal Trade Commission decided in January after a 19-month inquiry that Google had not broken antitrust laws. But Mr. Almunia has insisted that Google make changes to the most sensitive area of its business, online search.
The latest dispute stemmed from the settlement of a case concerning Microsoft’s dominance in Internet browsers, a dominance that the company has ceded to market forces in recent years.The latest dispute stemmed from the settlement of a case concerning Microsoft’s dominance in Internet browsers, a dominance that the company has ceded to market forces in recent years.
In Microsoft’s settlement of 2009, the company did not pay a fine but agreed to install a system called Browser Choice Screen with Windows. It was intended to offer alternatives like Google Chrome and Mozilla Firefox to counter the strength of Internet Explorer, Microsoft’s own browser.In Microsoft’s settlement of 2009, the company did not pay a fine but agreed to install a system called Browser Choice Screen with Windows. It was intended to offer alternatives like Google Chrome and Mozilla Firefox to counter the strength of Internet Explorer, Microsoft’s own browser.
The choice must be offered for five years, according to the agreement.The choice must be offered for five years, according to the agreement.
Millions of European users of the Windows 7 SP1 version of the software may not have been offered a choice of browsers from February 2011 to July 2012, Mr. Almunia said.Millions of European users of the Windows 7 SP1 version of the software may not have been offered a choice of browsers from February 2011 to July 2012, Mr. Almunia said.
The company said it learned of the error when the commission sent a notification about reports it had received indicating that alternative browsers were not being offered on some personal computers.The company said it learned of the error when the commission sent a notification about reports it had received indicating that alternative browsers were not being offered on some personal computers.
Microsoft’s failure to comply with the European order has already resulted in financial penalties of a different sort for the company’s own executives.Microsoft’s failure to comply with the European order has already resulted in financial penalties of a different sort for the company’s own executives.
In a filing with American financial regulators last October, Microsoft said that Steven A. Ballmer, the company’s chief executive, and Steven Sinofsky, then the head of its Windows division, received less than the full annual bonuses they were eligible for, in part because of the browser issue in Europe.In a filing with American financial regulators last October, Microsoft said that Steven A. Ballmer, the company’s chief executive, and Steven Sinofsky, then the head of its Windows division, received less than the full annual bonuses they were eligible for, in part because of the browser issue in Europe.
A month later, Mr. Sinofsky left the company in a decision that was described as “mutual” by people briefed on the matter.A month later, Mr. Sinofsky left the company in a decision that was described as “mutual” by people briefed on the matter.

Nick Wingfield contributed reporting from Seattle.

Nick Wingfield contributed reporting from Seattle.

This article has been revised to reflect the following correction:This article has been revised to reflect the following correction:
Correction: March 5, 2013Correction: March 5, 2013

An earlier version of this article misspelled the first name of a former executive with Microsoft. He is Steven Sinofsky, not Sinfosky.

An earlier version of this article misspelled the first name of a former executive with Microsoft. He is Steven Sinofsky, not Sinfosky.

This article has been revised to reflect the following correction:
Correction: March 6, 2013

An earlier version of this article misstated the period during which Microsoft failed to offer a choice of browsers to millions of European users of Windows 7 SP1. It was  between 2011 and 2012, not between 2011 and 2014.