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The EU Commission's Fine on Microsoft - What's Wrong With It? ~pj Updated
Thursday, March 07 2013 @ 06:02 PM EST

Gregg Keizer at ComputerWorld has some legal experts' reactions to the EU Commission's fine on Microsoft for failure to live up to its promises regarding making competing browsers available to users. The consensus is that it's incomprehensible that the Commission left oversight of the matter to Microsoft, who, of course, told them that all was going fine even when it was not:
"The reports we were receiving had not signaled us of this breach," said Joaquin Almunia, the head of the antitrust agency, when asked how the oversight went undetected for over a year.

Those reports, it turned out, were coming from Microsoft. "We trusted in the reports on the compliance [from Microsoft]," said Almunia. "We were not trying to explore Windows Service Pack 1. But maybe we should have tried to complement their reports."

He admitted the Commission may have made a mistake letting Microsoft police itself, rather than appointing an external overseer. "In 2009, we were even more naive than today," Almunia added.

Could be. But that's not the only problem.

What about the fact that in effect Microsoft has been able to "buy" noncompliance? By that I mean, the browser screen was supposed to be made available for 5 years. It wasn't made available for 14 months. Is the browser screen going to be kept in effect 14 months longer than the original cutoff date, to make up for that breach? According to this New York Times article, the date is still 2014. If so, Microsoft makes out like a bandit, once again. I've written to the EU Commission asking them about this issue, and I'll post any reply I receive.

Update: I heard from Maria Madrid, Press Officer: "The formal duration of the commitments has not been extended, but the Commission takes note that Microsoft intends to offer the browser choice screen for an additional period of 15 months after the end of the commitments."

Unfortunately, Microsoft's statement indicates that they expect a formal response from the EU Commission, so there seems to be a miscommunication:

Offered to Extend our Compliance Period: Since we have fallen short in our responsibility to display the BCS, we have offered to extend the time during which we are obliged to do so by an additional 15 months. We understand that the Commission will review this matter and determine whether this is an appropriate step for Microsoft to take. We understand that the Commission may decide to impose other sanctions.
But, you may say, at least they are paying a large fine. At least it cost them some money. Well, did it? Let's think. The EU Commission's press release tells us this about the results of the browser screen being initially available:
The choice screen was provided as of March 2010 to European Windows users who have Internet Explorer set as their default web browser. While it was implemented, the choice screen was very successful with users: for example, until November 2010, 84 million browsers were downloaded through it in 9 months.
That's 84 million browsers that were not IE being downloaded by users who otherwise presumably would have used IE. After all, if they already knew about the other browsers and knew how to download them, they wouldn't need a browser screen. Cynics, including me, might wonder if that is what caused the alleged "technical error" that erased the browser screen for the next 14 or so months. And yet, when doing EU Commission math, which may have come from Microsoft one might imagine, all things considered, Mr. Almunia says that in the 14 months from May 2011 to July 2012, when the "technical error" was revealed to the EU Commission, "approximately 15.3 million users did not see the ballot as intended," Keizer says Almunia said.

If there were 84 million downloads in 9 months, how can the math be credible that only 15.3 million users were deprived of the ballot screen in *14* months? I'd be interested in seeing support for that figure.

Bloomberg News notes that Mozilla said its downloads went down dramatically during the 14 months:

Mozilla Corp. General Counsel Harvey Anderson said in an October blog post that daily downloads of his companyís Firefox browser fell by 63 percent prior to Microsoft fixing the browser-choice issue and that the company may have lost as many as 9 million potential downloads as a result of the glitch.
And let's remember the purpose of the ballot screen, as the EU Commission itself described it back in 2009 in its press release:
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.

Today's 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 Commissionís 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 Commissionís 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 per cent 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 address these concerns. PC users, by means of the Choice Screen, will have an effective and unbiased choice between Internet Explorer and competing web browsers. 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.

Emphasis added, to highlight that there were benefits anticipated from the browser screen, benefits not encouraged for 14 months, and the beneficiary of that lapse is rather obviously Microsoft.

At least the EU Commission is doing something, which is more than the US is doing. But Microsoft... how can anyone still be naive about Microsoft? Why would any agency believe what they say without checking, setting up a system where nobody had to check up on them for two years, given the track record? And they can't say nobody warned them. They ignored what ECIS told them at the time:

We stress however that implementation that effectively delivers choice for consumers and a level-playing field for competitors, depends on robust and sustained monitoring and enforcement of the settlement.

Our emphasis on enforcement is based on years of familiarity with Microsoft's inadequate commitments and broken promises.

They should have listened.

ECIS provided the EU Commission with a history of Microsoft anticompetitive behavior, and it also told the EU Commission that Microsoft had a history "of vitiating measures designed to promote competition."

And that's why legal experts here have their jaws hanging open, finding it incredible that the EU Commission let Microsoft act on the honor system, nor do they all believe Microsoft's self-serving alibi:

"The Federal Trade Commission, where I used to work, has an entire compliance department, with lawyers and economists, to make sure orders are complied with," said Robert Lande, a law professor at the University of Baltimore and director of the American Antitrust Institute. "That's kind of elementary. It's not rocket science."

Lande also blasted the Commission for allowing a repeat offender to police itself. "Why would you put a three-time offender on the honor system?" Lande asked, referring to other antitrust actions against Microsoft, both in the U.S. and in the EU, that have resulted in billions in fines.

Lande thought the explanation incredulous. "You can't say it's accidental for 15 months," he argued today. "Microsoft says it was a technical glitch, okay, one month, I understand, you left it out of a batch. But not for 15 months. That doesn't look like an accident to me."

Not to me either. Kudos to Keizer for the article, which I hope you read in full. You can find all the documents related to this case here.

And may I add, no agency should believe what they say about their competitors without checking, either. Take it from the US, where we watched Microsoft's fancy dancing to delay obedience to the US compliance requirements after the US v. Microsoft case. The EU Commission itself has some experience with having to fine Microsoft to ensure compliance before, too. Now we have been watching Microsoft on an anti-Google FUD campaign, in the media and to regulators, along with its running dogs, all of whom complain about Google in chorus. I have concluded, personally, that Microsoft just doesn't want to be the only tech company punished for anticompetitive behavior.

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