Microsoft Settles With the European Commission

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Microsoft’s long-running feud with the European Commission (EC) may finally be at an end — or maybe not.

Neelie Kroes, the outgoing commissioner for competition in the EC, announced Wednesday morning in Brussels that the EC has settled its latest antitrust case against the software giant regarding bundling of Internet Explorer (IE) with Windows going back to 1996.

Under the deal’s terms, Microsoft will provide a “choice screen” on PCs sold within the European Economic Area that lets users choose which of a dozen or so browsers they would like to set as their default. The screen will be made available for five years and will enable users of Windows XP, Windows Vista, and Windows 7 to choose from a randomly displayed list of browsers. The choice screen will be provided to users via Windows Update.

The agreement will also let PC makers basically remove IE and substitute a different browser if they wish.

“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,” Kroes, who shepherded the case through the nearly year-long process, said in a statement.

Microsoft is just glad to put the issue behind it.

“The measures approved today reflect multiple rounds of input from industry participants relating to competition in Web browser software and interoperability between various Microsoft products and competing products,” Microsoft General Counsel Brad Smith said in a statement.

The original complainant, Norway-based Opera Software, expressed that it’s pleased with the outcome.

“This is a major victory for the Web because users will have a choice of browsers that they never had before,” Hakon Wium Lie, CTO of Opera, told InternetNews.com.

The case began in December 2007 when Opera filed a complaint with the EC — the European Union’s (EU) executive branch — arguing that Microsoft’s continued bundling of IE with Windows going back more than a decade, froze other competitors out of the increasingly important browser arena.

EC competition commissioner Kroes agreed and in January 2009, issued a “statement of objections,” the first step towards legal action against Microsoft. After behind the scenes negotiations through the summer, Microsoft accepted what was then called a “ballot screen” that would let users choose a browser for themselves.

During a trial period this fall, Microsoft tested the ballot screen idea and made adjustments based on input from both users and competitors, ultimately resulting in the random presentation of browsers when what is now called the “choice screen” is presented to users.

U.S. Department of Justice weighs in

Although Kroes at one point over the past few years had to tell the U.S. Department of Justice (DoJ) to stay out of EC business, in a conciliatory move, the DoJ hailed the settlement.

“As we understand it, the settlement is based on measures to enhance competition and is designed to preserve industry participants’ incentives and ability to compete going forward. A settlement that helps to clarify obligations under European law allows the industry to move forward,” Christine Varney, Assistant Attorney General of the DoJ’s Antitrust Division, said in a statement.

As they say on the late night infomercials — but wait, there’s more.

Microsoft has also committed to provide interoperability information to competitors and others regarding how to work with the company’s technologies — particularly Windows, Windows Server, Office, Exchange, and SharePoint products.

Such interoperability concessions were the result of another long simmering complaint lodged against Microsoft by the European Committee for Interoperable Systems (ECIS), an organization that includes many of the company’s competitors, including IBM, Oracle, and Sun.

Wednesday’s agreement also settles that dispute recognizing Microsoft’s commitment to fulfill the requirements of the settlement.

The ECIS also said it was pleased with the settlement but remains cautious about the future of the agreement.

“Whether third parties will in fact be able to obtain the information necessary to create software that is fully interoperable with Microsoft’s dominant products will depend on how this commitment is applied by Microsoft and enforced by the Commission. Past experience is not promising; future experience alone will tell,” ECIS Legal Counsel Thomas Vinje said in a statement.

So what about fines, penalties, interest?

By agreeing to virtually everything the EC demanded, Microsoft gets to take it easy on the company’s checkbook — that is, there will be no financial punishment as long as Microsoft lives up to its end of the bargain.

That doesn’t mean that Microsoft’s contretemps with the EC are done and over with, however.

The software giant is still appealing a fine levied against it in a previous antitrust case — one that concerned Microsoft’s bundling of Windows Media Player with Windows as well as other interoperability issues — that stems from a 2004 ruling against it.

Microsoft had appealed that earlier decision all the way to the EU’s highest court — the Court of First Instance — which found that the EC was in the right. After paying more than a billion dollars in fines, penalties, and interest for its tardiness in making interoperability information available to competitors, the EC slapped Microsoft with an additional fine of $899 million Euros ($1.3 billion).

Microsoft has appealed that ruling which is still pending, a Microsoft spokesperson confirmed.

Through it all, however, Microsoft still sees the reality of the loosening of antitrust shackles as a benefit, even if it can’t get off completely scot free. But will all the cooperation and oversight paralyze the software giant?

“Microsoft is being smart about it, compared with how they would have handled this ten years ago,” Matt Rosoff, research vice president at Directions on Microsoft, told InternetNews.com.

“Antitrust may have slowed them down a little bit, but I don’t think it’ hurting them,” Rosoff added.