On 6 March 2013, the European Commission (the "Commission") fined Microsoft €561 million for failing to comply with commitments to offer a choice of web browsers with its Windows operating system. It is the first time the Commission has imposed a fine for non-compliance with a commitments decision.
Background
In early 2009, the Commission informed Microsoft that it was
potentially abusing its dominant position in the market for client
personal computer operating systems by tying Internet
Explorer to Windows. The Commission deemed that
Microsoft gained an artificial distribution advantage unconnected
to the merits of its product on more than 90 per cent of personal
computers. The Commission also considered 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.
In late 2009, Microsoft entered into legally binding commitments
to offer European users of Windows a choice of different
web browsers and to allow computer manufacturers and users the
possibility to turn Internet Explorer off. Essentially,
Microsoft committed for a five year period to generate a
"choice screen" so that users of the Windows
operating system could choose which web browser(s) they wanted to
install. Initially, the company complied and users reacted
positively to the choice. The Commission indicated that it had
gathered evidence suggesting that Microsoft stopped displaying the
choice screen in early 2011 following the company's launch of
its Windows 7 Service Pack 1. Further, that Microsoft failed to
provide the choice screen during the period from May 2011 to July
2012 affecting approximately 15 million users. Microsoft pointed to
a 'technical error' that caused the problem.
Fine
Under Article 23(2) of Regulation 1/2003, the Commission may impose fines of up to 10 per cent of total turnover on companies which fail to comply with commitments they have given. This is the first time the Commission has done so. In calculating the fine, the Commission considered the gravity and duration of the infringement, the deterrent effect and, as a mitigating factor, the fact that Microsoft cooperated with the Commission's investigation.
Significance
Levying fines for competition infringements is intended
to send signals to companies to discourage them from breaching
competition law. Often companies offer commitments in order to
avoid paying fines, although complying with commitments in itself
may be expensive for them. Commitments allow investigations to be
closed faster (which can benefit both sides) and no formal finding
of infringement is made against the company. On the other hand,
prohibition decisions, as opposed to commitments, make a finding of
infringement and set a much stronger precedent for future
cases.
The Commission (and the Irish Competition Authority) tend to
prefer structural commitments as they are generally more effective
than behavioural commitments (like the browser choice commitments
by Microsoft). Structural commitments generally do not require
oversight by the Commission. Checking compliance with behavioural
commitments which relate to specific conduct of a dominant company
is a difficult and resource-intensive task. Nevertheless, the
Commission's finding in this case shows that it is prepared to
put the effort into monitoring behavioural commitments - this can
be through companies' reporting obligations, vigilance of other
market players and/orby appointing an independent monitoring
trustee.
As a result of this investigation, the Commission has stated that
it will monitor companies' conformity with commitments more
closely and will be stricter in designing its monitoring
tools.
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