Microsoft and EU Commission Latest

December 16, 2009

The long history of dispute between the EU Commission and Microsoft may have come to an end. The latest commitments from Microsoft are said by the Commission itself to address effectively the outstanding concerns that it had about Microsoft policy of tying its web browser Internet Explorer to the Windows PC operating system. This was seen by the Commission as being in breach of EU rules on abuse of a dominant market position. Microsoft has committed to offering European users of Windows a choice among different web browsers and will allow computer manufacturers and users the option of turning Internet Explorer off. Microsoft is also publishing an undertaking whereby it commits to make far-reaching interoperability disclosures.
Competition Commissioner Neelie Kroes said: ‘Millions of European consumers will benefit from this decision by having a free choice about which web browser they use. Such choice will not only serve to improve people’s experience of the internet now but also act as an incentive for web browser companies to innovate and offer people better browsers in the future’.
Under the commitments approved by the Commission, Microsoft will make available for five years in the European Economic Area (through the Windows Update mechanism) a ‘Choice Screen’ enabling users of Windows XP, Windows Vista and Windows 7 to choose which web browser(s) they want to install in addition to, or instead of, Microsoft’s browser Internet Explorer.
The commitments also provide that computer manufacturers will be able to install competing web browsers, set those as default and turn Internet Explorer off.

Stephen Hornsby of Davenport Lyons commented:

‘Users are only likely to use one browser per machine – it makes no sense having more than one as they are designed to do the same thing. The issue has been that Microsoft started to bundle IE Explorer with windows, which had the effect of knocking other competitors (particularly Netscape) out of the market, as users did not want to uninstall / re-install. The new situation is that there will be no bundling of IE with windows. Although customers will get an option that they did not have before, users will not get a choice of browsers.

Manufacturers of PCs are still free to load a browser of their choice. The browser industry is pushing for a straight choice when users set up their PC. This could be undertaken by manufacturers in any event – perhaps to save consumers the bother of loading anything other than a set of internet links. This will undoubtedly lead to more people using different browsers (i.e. not IE explorer). Google particularly are spending a lot of money on advertising Chrome, so I would expect it to appear on a greater percentage of machines than it currently does if it is purely driven by user choice when they first fire up a machine.
The marketing of browsers may have more of an impact on choice from now on – currently it does not. Browsers may come with inducements – faster searching, more gadgets and extra software. That in theory could be good for consumers. If the options are good then people will choose them. However there are plenty of other issues for consumers to consider. For example, if your bank only optimises its code for a certain brand of browser, you will be having your arm twisted choice wise.
One thing that IE explorer did provide, by being dominant, was a consistent platform for web development and delivery. There is an argument that this consistency may disappear.
This case like the IBM case in the 1980s took 10 years to bring to a conclusion. In broad terms it was more meritorious but it won’t be clear for some time whether it will make any real difference to the overall strength of Microsoft’s position. These markets move much quicker than the regulatory processes and IBM’s undertakings were dropped in the early 1990s because the market had evolved (in favour of a company called Microsoft) for reasons unconnected with the legal action!’


The decision follows a Statement of Objections sent to Microsoft by the Commission on 15 January 2009 (see MEMO/09/15 ). The Statement of Objections outlined the Commission’s preliminary view that Microsoft may have infringed Article 82 of the EC Treaty (now Article 102 of the Treaty on the Functioning of the European Union) by abusing its dominant position in the market for client PC operating systems through the tying of Internet Explorer to Windows.
The Commission’s preliminary view was that competition was distorted by Microsoft tying Internet Explorer to Windows. This was because it offered Microsoft an artificial distribution advantage not related to the merits of its product on more than 90% of personal computers. Furthermore, the Commission’s preliminary view was that this tying hindered innovation in the market and created artificial incentives for software developers and content providers to design their products or web sites primarily for Internet Explorer. The approved commitments are said to address these concerns. The Commission says that PC users, by means of the Choice Screen, will have an effective and unbiased choice between Internet Explorer and competing web browsers and that this should ensure competition on the merits and allow consumers to benefit from technical developments and innovation both on the web browser market and on related markets, such as web-based applications.
The Commission’s decision is based on Article 9 of Regulation 1/2003 on the implementation of EU antitrust rules. It takes into account the results of the market test launched in October 2009 (see MEMO/09/439 ). This decision, which does not conclude whether there is an infringement, legally binds Microsoft to the commitments it has offered and ends the Commission’s investigation. If Microsoft were to break its commitments, the Commission could impose a fine of up to 10% of Microsoft’s total annual turnover without having to prove any violation of EU antitrust rules.
A clause in the commitments allows the Commission to review the commitments in two years. Microsoft will report regularly to the Commission, starting in six months’ time, on the implementation of the commitments and under certain conditions make adjustments to the Choice Screen upon the Commission’s request.
In July 2009, Microsoft also made proposals in relation to disclosures of interoperability information that would improve interoperability between third party products and several Microsoft products, including Windows, Windows Server, Office, Exchange, and SharePoint (see MEMO/09/352 ). After intensive discussions with the Commission, Microsoft is today publishing an improved version of the undertaking and related documents (for example a warranty agreement and a patent licence agreement) on its website. The Commission welcomes this initiative to improve interoperability. Even though it remains informal vis-à-vis the Commission, Microsoft’s public undertaking offers assurances to third parties that can be privately enforced. The Commission will carefully monitor the impact of this undertaking on the market and take its findings into account in the pending antitrust investigation regarding interoperability (see MEMO/08/19 ).
This latest acceptance by the Commission is the second important commitment accepted by the Competition authorities in a week.  On 9 December the European Commission adopted a decision that renders legally binding commitments offered by Rambus Inc, most notably a commitment to put a cap on its royalty rates for certain patents for Dynamic Random Access Memory chips (DRAMS).