The now infamous software glitch has left the assurance in tatters. And Microsoft is bracing for hefty fines. In fact, the only question remaining is how severe the penalty will be. The EU is not prepared to rule out the maximum fine of 5 billion euros (around $7 billion) – about ten percent of Microsoft’s annual revenue.
Explorer’s fall from grace
At the heart of the EU’s initial antitrust concerns is Microsoft’s web browser, Internet Explorer. Today, its share of the browser market in Europe is estimated to have dropped to around 25 percent from 90 percent ten years ago.
Back then, the European Commission (the EU’s executive) became concerned that Microsoft was limiting browser competition by distributing Internet Explorer free with its operating systems.
The concerns led to the commission imposing large fines on Microsoft. But more importantly, through a relatively speedy out-of-court settlement the commission obtained a commitment to change the way Internet Explorer was distributed.
Microsoft agreed to provide its European customers with a so-called “ballot box” page. Users installing Microsoft would be given a choice of 12 web browsers – including its own Internet Explorer.
But things went horribly wrong. The ballot box page didn’t appear on customers’ screens between February 2011 and July 2012.
For 17 months, Microsoft didn’t keep its end of a legally binding settlement. For a while, it looked like EU authorities had not taken notice.
The EU’s big stick
The commission is taking a tough stance on competition. It recently accused computer giant Apple of what could be considered price fixing on e-books with four major publishing companies.
Search-engine Google is also facing the wrath of EU regulators, who have expressed concerns that the company is relying on its market dominance to block rivals.
Both the Apple and Google inquiries are expected to dominate the commission’s competition agenda in coming months. And that’s why the commission is expected to get tough with Microsoft. It needs to send a message that out-of-court settlements must be taken seriously.
“Instead of going through very long procedures, which can lead to court battles, […] we believe that by reaching such agreements […] we can bring more benefits quicker to consumers,” says Antoine Colombani, spokesman for the European Competition Commissioner.
However, with technology moving so fast, the commission now finds itself in the unusual position of imposing more fines on Microsoft over competition concerns that no longer exist. With the popularity of web-browsers like Firefox and Chrome, Internet Explorer no longer attracts attention from regulators.
But the current landscape isn’t the point, says Dr. Mario Mariniello from the Brussels-based think-tank Bruegel. It’s about enforcing the original settlement, which the commission argues would benefit consumers.
“Clearly the players change over time,” Mariniello says.
“Now it has reached the point in which we have to verify whether the action that was taken at the time actually had consequences. And it’s the right moment also to send signals to the new key players,” he adds.