Print 92 comment(s) - last by Phoenix7.. on Mar 10 at 8:41 PM

EU's continues to milk its favorite cash cow

How much does "whoops" cost?  If you're Microsoft Corp. (MSFT) the answer is $731M USD.

The EU pummeled Microsoft this week with a €561M fine for defying its browser selection edict, which called for special features to be added to versions of Windows sold in the European Union.  

Comments the EU:

The European Commission has imposed a €561 million fine on Microsoft for failing to comply with its commitments to offer users a browser choice screen enabling them to easily choose their preferred web browser. In 2009, the Commission had made these commitments legally binding on Microsoft until 2014 (see IP/09/1941). In today's decision, the Commission finds that Microsoft failed to roll out the browser choice screen with its Windows 7 Service Pack 1 from May 2011 until July 2012. 15 million Windows users in the EU therefore did not see the choice screen during this period. Microsoft has acknowledged that the choice screen was not displayed during that time.

The fine brings the Commission's total looting of Microsoft on antitrust violations to around $2.8B USD.  Microsoft's latest violation traces back in 2009, during the launch of Windows 7.  At the time, Microsoft held a dominant position in the browser market thanks to its bundling of its Internet Explorer (IE) browser with its market-leading operating system.

Rival browser makers complained and the EU sided with them, mandating Microsoft to supply a "ballot" screen allowing users to pick between IE and third-party browsers like Google Inc.'s (GOOG) Chrome or Mozilla's Firefox.

Steve Ballmer w Windows 8
Microsoft is facing more big fines for breaking the EU's rules. [Image Source: AFP]

And the approach worked.  It appeared that the most powerful thing driving Microsoft's market share was inertia; most users simply never bothered to download or try other browsers, sticking with the one that was built in.  Once they were presented with a choice, they jumped ship from IE.

Microsoft clearly wasn't happy with this, but it promised to comply with the EU ruling.

Then in May 2011, it release Windows 7 Service Pack 1, which "accidentally" removed the browser selection screen due to a "coding error".  Despite multiple warnings from the EU, Microsoft didn't bother to fix this little "whoops" until over a year had gone past.  As a result the EU opened new proceedings, which culminated with this week's massive fine.

Today Microsoft is in third place in the PC browser market with only about 24 percent of the market, behind Google 35 percent and Mozilla's 29 percent.  But the EU argues vigorous enforcement must continue in order to prevent Microsoft from repeating history and gaining a dominant market position through anticompetitive tactics.

One apparent flaw in the EUs logic, though, is that the antitrust regulators fail to hold mobile operating system makers like Google or Apple, Inc. (AAPL) to a similar standard.  Apple -- whose iPad tablet accounts for the majority of tablet sales -- and Android -- who accounts for the majority of smartphone sales -- both only package their devices with their own proprietary built in browser.  The question remains -- how is that monopoly-promoted bundling any different than what Microsoft did?  

Opera Mmini
Smartphone market leader Google has not been required to provide a browser ballot to phone subscribers by the EU.

But for better or worse the EU appears content to make Microsoft its whipping boy. Microsoft will likely appeal the fine, but past appeals have largely failed.

For now Microsoft's tone was largely apologetic.  In a statement it comments, "We have apologized for [the error].  We provided the Commission with a complete and candid assessment of the situation, and we have taken steps to strengthen our software development and other processes to help avoid this mistake - or anything similar - in the future."

Sources: Europa [EU press releases], Reuters [Microsoft response]

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RE: Can We Stop?
By ClownPuncher on 3/6/2013 5:44:15 PM , Rating: 2
Trust me, You would rather think about it than let the EU fine Microsoft out of business.

RE: Can We Stop?
By Reclaimer77 on 3/6/2013 5:50:13 PM , Rating: 2
Nah it wouldn't get to that point. If EU compliance actually cost them THAT much, they would just cut off the EU if it means going out of business otherwise.

Argh damnit, you're making me think about this more! :P

RE: Can We Stop?
By ClownPuncher on 3/6/2013 7:10:39 PM , Rating: 2
90% of the EU would then just pirate Windows and Office software.

RE: Can We Stop?
By Cloudie on 3/6/13, Rating: -1
RE: Can We Stop?
By ClownPuncher on 3/6/2013 7:48:28 PM , Rating: 5
They should never have been forced to add it in the first place. I think they are being bullied.

RE: Can We Stop?
By mikeyD95125 on 3/6/2013 8:28:42 PM , Rating: 2
Regardless of the justification Microsoft needed to comply with the ruling and fight it out in court or however one challenges an EU ruling. 'Protesting' is never free and resulted in more financial loss.

It is just like if you are wronged by the police on the street, fighting it will only get you in more trouble. You just got to wait for your day of appointed 'justice' in court.

RE: Can We Stop?
By RufusM on 3/7/2013 12:04:32 PM , Rating: 2
I agree that Microsoft clearly let this slip and to take so long to put it back in was ridiculous. They deserve to be punished.

Having said that, $730M seems high for this type of fine. I couldn't find the EU calculations behind it. Also, does the money from this fine go to the EU, or does it all go to repair the harm Microsoft caused?

It seems like the EU and EU countries are going after large, global companies more to generate revenue rather than solely to enforce laws. It seems like they produce fines high enough to financially injure the company, but not enough to put it out of business. They wouldn't want to kill the goose that lays golden eggs after all.

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