Europe Drops Microsoft Antitrust Case Over Browsers
BERLIN — European regulators dropped their antitrust case against Microsoft on Wednesday after the software maker agreed to offer consumers a choice of rival Web browsers. The settlement averted a second costly legal battle for the American software giant.
Neelie Kroes, the European competition commissioner, said the agreement with Microsoft was an “early Christmas present for more than hundreds of millions of Europeans” who would get “effective and unbiased choice” between competing browsers.
The agreement, announced in Brussels by the European competition commissioner, Neelie Kroes, calls for Microsoft to give Windows users a choice of up to 11 other browsers from competing companies, including Mozilla, Apple and Google.
Users of Microsoft’s ubiquitous Windows operating system in Europe who have chosen its Internet Explorer as their default browser will receive in a software update an option to switch to a rival, starting next year.
“Millions of European consumers will benefit from this decision by having a free choice about which web browser they use,” Ms. Kroes said in a statement.
In a statement, Microsoft said it was “pleased” with the decision. Jesse Verstraete, a Microsoft spokesman in Brussels, said the company has no plans to extend the offer beyond the 27-member European Union, plus Norway, Iceland and Liechtenstein.
Still, the settlement underlines, according to legal experts, the increasingly conciliatory posture being taken by U.S. technology companies to avoid sanctions — and to be able to keep doing business — in Europe.
“These companies recognized that the European Commission is playing a significant role in global antitrust law and must be taken seriously,” Susanne Zuehlke, an antitrust lawyer in Brussels at the U.S. firm of Latham & Watkins, said ahead of the announcement. “Of course, the huge fines recently have also focused everyone’s attention.”
For Microsoft, the settlement is a stark contrast to its acrimonious first legal clash with European officials, which resulted in fines of €1.68 billion, or $2.44 billion and an order to change some business practices. That case, which lasted nearly a decade, ended in October 2007 when Microsoft dropped its appeal of a commission judgment that it had abused the dominance of Windows to aid its media player and server businesses.
Two months after Microsoft gave up, Opera, a small Norwegian browser maker, filed its complaint over browsers, instigating the second case.
Google, which makes the Chrome browser, and Mozilla, makers of Firefox, signed on as opponents in the case. The commission in January said Microsoft’s bundling of Internet Explorer in Windows was harming competition. In July, Microsoft proposed the browser distribution plan which, after adjustment to appease rivals, led to the settlement.
Rival browser makers said the agreement represented a huge opportunity for their own Internet-surfing software, which they said would also give Europeans more choice and a better ability to compare browsers.
“I think this settlement has the potential to change the status quo,” Sundar Pichai, the head of Google’s Chrome browser team and Chrome web-based operating system, said. “Most consumers in the past have chosen Internet Explorer because it came on their computers. Now the decision will be made on the merits.”
Microsoft’s Windows operating system runs more than 90 percent of all computers in the world.
Under terms of the European settlement, Microsoft will, by mid-March, send ballot screens via automatic software updates to 100 million users of Windows XP, Vista and 7 operating systems in Europe who have set Internet Explorer as their main browser.
Through March 2015, the screens will also be automatically sent to purchasers of new Windows-based computers, an estimated 30 million per year. Computer makers will also have the ability to turn off Internet Explorer before sale and install rival browsers.
On the ballot screen, consumers initially will be able to choose from Internet Explorer, Firefox, Safari, Chrome, Opera, AOL, Maxthon, K-Meleon, Flock, Avant Browser, Sleipnir and Slim Browser. The first five, which are the most widely used, will be prominently displayed, and the others will be shown when a user scrolls sideways on the screen.
Internet Explorer had 62 percent of the European market in September, according to AT Internet Institute, a research firm that tracks browser use in Merignac, France. That was followed by Firefox with 28.4 percent, Apple’s Safari with 4.3 percent, Google’s Chrome at 2.8 percent, and Opera at 2.2 percent.Nicolas Babin, the chief operating officer of AT Internet, said it was unclear what the settlement’s impact on the market would be.
But any changes in market share are likely to come at Microsoft’s expense, given its dominance, he said.
But small browser makers like Maxthon, which is based in Beijing, saw the settlement as an opportunity.
Maxthon, whose investors include Google, Charles River Investments and Morton Lund, an early investor in Skype, gives away its browser and earns money from Google and Yahoo by sending its browser users to their search engines.
“Maxthon has been downloaded 300 million times,” said Jeff Chen, the Maxthon founder and chief executive. “We have lots of European users and we want more to know our browser.”
Aside from the settlement’s effect on the browser market, legal observers said Microsoft’s agreement to effectively distribute the software of rivals was confirmation of Europe’s rising clout in setting global antitrust standards.
“Mrs. Kroes’ big contribution has been to raise the fines,” said Annette Schild, a competition lawyer in Brussels at Arnold & Porter. “That has really raised the pain threshold and contributed to the commission's rising stature in antitrust cases.”
Within the past year, the commission, under Ms. Kroes, has wrung concessions from Oracle, which is seeking EU approval to acquire Sun Microsystems; Rambus, which agreed to lower its royalties on some memory chips; and now Microsoft.
Last month the commission also dropped a four-year probe into Qualcomm’s rebate policies after the U.S. maker of cellphone chips settled with the seven rival companies that had filed the initial complaint.
Each time, the U.S. technology companies decided they needed to change how they do business in Europe to avert more fines, legal costs and bad publicity.
That has left some companies like Intel, the world's largest computer chip maker which is vigorously trying to reverse a commission judgment, in a shrinking minority.
Ms. Kroes fined Intel €1.06 billion in April for using improper rebates and incentives to convince computer makers to use its processors over those of a rival, Advanced Micro Devices. Intel is appealing but a hearing isn’t likely until 2011 — at the earliest.
Despite Wednesday’s settlement, Microsoft is not out of the woods in Europe.
The commission is still investigating the company’s compliance with its previous order to share confidential operating code with rivals, so as to let third-party software work better with Windows-based computers and servers.
But even here, Microsoft on Wednesday also made concessions, agreeing to share more information with its rivals, including publishing a warranty agreement and a patent licensing agreement.
“We look forward to building on the dialogue and trust that has been established between Microsoft and the Commission and to extending our industry leadership on interoperability,” Brad Smith, Microsoft’s general counsel, said in the company’s statement.
The commission said it welcomed Microsoft’s new disclosure, although the case is still officially ongoing.
