Microsoft Admits Failing To Comply With European Commission Browser Pact

Microsoft is admitting that it failed to live up to a 2009 agreement with the European Commission that it would offer consumers a choice of using Microsoft's or a competing browser.

Microsoft's mea culpa came earlier today after the European Commission said it was investigating whether Microsoft failed to comply with the legally binding pact. The software vendor could face financial penalties for the blunder.

"Needless to say, we take compliance with our decision very seriously," said Joaquin Almunia, a European Commission vice president who is responsible for competition policy, in a press briefing Tuesday. "If the infringement is confirmed, there will be sanctions."

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In December 2009, Microsoft agreed to provide European consumers with a "browser choice screen" that would allow them to select what browser they wanted to use -- Microsoft's Internet Explorer or a browser from another vendor -- when launching Windows.

That legally binding agreement settled a decade-long dispute over whether Microsoft was in violation of European Union antitrust rules by bundling Internet Explorer with Windows.

In a statement issued Tuesday, Microsoft acknowledged that it had "fallen short in [its] responsibility" to comply with the agreement. Blaming a "technical error," Microsoft said that when it launched Windows 7 Service Pack 1 in February 2011, it failed to include a browser choice screen with PCs that were sold with the operating system update.

Microsoft said the browser choice screen was delivered to owners of PCs running the original Windows 7, as well as those running Windows XP and Windows Vista.

Microsoft said it learned only recently that it missed serving the browser choice software to "the roughly 28 million PCs running Windows 7 SP1." That came after the European Commission, the European Union's governing body, received complaints that the browser choice software was not appearing on some PCs.

"While we have taken immediate steps to remedy this problem, we deeply regret that this error occurred and we apologize for it," Microsoft said. The company said it developed a software fix for the problem and began distributing it on July 3. "We expect to substantially complete distribution of the [browser choice screen] software to the PCs we initially missed by the end of the week."

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Microsoft also said it has hired "outside counsel" to conduct an investigation into how the problem occurred and will share the results of that investigation with European Commissioners. It also has offered to extend by 15 months the five-year compliance period Microsoft agreed to in the 2009 agreement.

European Commission's Almunia, in his statement, noted that Microsoft submitted a compliance report to the Commission in December 2011 saying the browser choice screen software was present, even though it was missing from PCs using Windows 7 SP1. Microsoft said that when it submitted the report, it believed it was distributing the browser choice screen software "to all relevant PCs as required."

While acknowledging that Microsoft has admitted to the facts in the case, Almunia said the European Commission was "opening formal proceedings" against Microsoft, and a confirmation of a breach of the agreement "could have severe consequences."

"Generally speaking, I consider that commitments by companies themselves are a good way to solve competition problems when we identify them, as an alternative to lengthy proceedings," Almunia said. "This is true especially in fast-moving markets such as in the IT sector. But this can only work if companies implement these commitments fully."

PUBLISHED JULY 17, 2012