UPDATE 1-EU fines Microsoft 561 mln euros for breaking browser promise

Wed Mar 6, 2013 6:56am EST

* European Commission says company did not respect antitrust deal

* U.S. firm failed to offer users a web browser choice

* Fine raises total EU penalties against Microsoft to 2.16 bln euros

By Foo Yun Chee

BRUSSELS, March 6 (Reuters) - The European Union fined Microsoft Corp 561 million euros on Wednesday for failing to offer consumers a choice of web browser, a charge that will act as a warning to other technology firms involved in antitrust disputes with the EU.

It said the U.S. company had broken a legally binding commitment made in 2009 to ensure consumers had a choice of browser, rather than defaulting to Microsoft's Internet Explorer.

An EU investigation found that Microsoft had failed to honour that obligation in software issued between May 2011 and July 2012, meaning that 15 million users were never made aware that they could choose.

"Legally binding commitments reached in antitrust decisions play a very important role in our enforcement policy," said Joaquin Almunia, the EU's competition commissioner.

"A failure to comply is a very serious infringement that must be sanctioned accordingly."

Wednesday's fine is the first time the European Commission, the EU's antitrust authority, has fined a company for non-compliance with agreed commitments. It could have charged Microsoft up to 10 percent of its global turnover, or as much as $7.9 billion.

In that respect, the fine is relatively light, but still marks a firm sanction by the EU and will not go unnoticed by the likes of Google, which is involved in a dispute with the Commission over how it ranks search engine results.

Google is under pressure to offer concessions to prevent the antitrust authority moving to the next stage in the case, which could involve fines. Other major technology firms are also in the Commission's crosshairs in other cases.

Microsoft has a long and bitter relationship with the EU's powerful antitrust authority, which has now issued fines totalling 2.16 billion euros against the U.S. firm.

In 2004, the Commission found that Microsoft had abused its dominant market position in relation to the tying of Windows Media Player to the Windows software package and imposed fines.

Then in 2009, in order to resolve other competition concerns, Microsoft undertook to offer users a browser choice screen allowing them to download a browser other than Explorer.

The Commission made that obligation legally binding for five years, until 2014, and initially the company complied. From March 2010 until November 2010, 84 million browsers were downloaded via the screen, the Commission said on Wednesday.

But the Windows 7 service pack 1 rolled out between mid-2011 and mid-2012 failed to offer the choice, leading to the investigation that resulted in Wednesday's fine.

Microsoft has said the failure was the result of a technical error and that procedures have since been tightened.

In what was seen as an acknowledgement of the severity of the mistake, the board cut the bonus of chief executive Steve Ballmer last year, according to company's annual proxy filing.

The Commission said it had taken into account in calculating the fine that Microsoft had cooperated by providing information that had helped speed-up the investigation.

Analysts always found it odd that Microsoft would have purposefully failed to offer a choice of browsers via its software given that the potential fine for such a failure would far exceed any potential income from not offering it.

Microsoft's share of the European browser market has more than halved since 2008 to 24 percent. Google's Chrome has a 35 percent share, followed by Mozilla with 29 percent, according to Web traffic analysis company StatCounter.

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