Microsoft’s $732 Million Mistake – Did Google Snitch?

from wsj

• March 6, 2013, 6:00 PM

• Article

By Tom Gara

Reuters

Microsoft CEO Steve Ballmer speaks at the launch of the company’s 365cloud service in New York.

It’s not just the European auto industry that is partying like it’s 1999 — the European Union is also taking us back to that long-gone time  when Microsoft’s dominance of the PC business and bullying of competitors was still the big issue in the tech industry. Today, the European Commission levied a new $732 million fine on Microsoft, punishing the company for failing to comply with a previous settlement over its Internet Explorer web browser.

That browser settlement, came in the wake of a €1.64 billion in fines the EU had already laid on the company during the 2000s for other anti-competitive practices.  Essentially, Microsoft agreed to give Windows users an up-front choice of which web browser they wanted installed on their computers.

In what turns out to have been a costly business move, Microsoft MSFT -0.92% failed to do this, the WSJ’s Vanessa Mock reports:

Microsoft struck a deal with the commission in 2009 to address long-running concerns related to the way the company’s Web browser was tied to its Windows personal-computer operating system, which at the time had a 90% market share in Europe.

Microsoft promised to offer users a “choice screen” until 2014 to allow them to switch to other browsers. Despite early implementation, regulators later received a complaint from a third-party and spotted that the choice had been removed from February 2011 until July 2012. Internet Explorer’s market share has dropped to just under 30% from 50%, which the commission said is partly because of the introduction of the choice screen.

Microsoft said it took “full responsibility” for the removal, which it has blamed on a “technical” error.

That could become a three-quarters-of-a-billion-dollar kind of error if the new fine stands, hence Microsoft boss Steve Ballmer losing half his annual bonus last year.

But equally interesting is how the “choice screen” managed to disappear for more than a year without Microsoft or the EU noticing — an absence only uncovered when a “third party” complained. Who could that third party be? Google GOOG -0.86%, working with Norwegian browser company Opera:

Google has struck a €561m blow to Microsoft after the EU’s competition authority heavily fined the maker of Windows for settlement breaches secretly flagged up by the US internet group.

Brussels punished Microsoft for failing to give at least 15m consumers a choice of web browser – a violation of a voluntary antitrust pact that was spotted and raised by Google and Opera, according to several people familiar with the case.

While Google may have succeeded in poking Microsoft in the eye, the victory may come back the haunt the search giant, the FT reports:

This is a double-edged victory for Google, however, given it is in the later stages of its own EU settlement negotiations. Microsoft’s lapse, which went unnoticed for more than a year, is prompting Mr Almunia to consider putting more rigorous monitoring conditions in future deals.

Microsoft, which in the search market is now the kind of underdog that it would have crushed during its own time at the top, has been active in pushing regulators in Europe and the U.S. to investigate Google’s market power. In the U.S., that effort achieved little, and Google’s competitors are now crossing their fingers for a tougher ruling by the EU.