EU prepares to settle Microsoft browser case

BRUSSELS - October 7, 2009

Microsoft promised the changes after the EU charged it with monopoly abuse for tying the Internet Explorer browser to the Windows operating system installed on most of the world's desktop computers.

Microsoft's general counsel Brad Smith said the EU announcement was "a big step" toward ending its antitrust woes in Europe and would allow the company to focus on European regulatory approval for "our agreement with Yahoo, that is objective no. 1." In July, Yahoo agreed to let Microsoft handle its searches as part of a 10-year deal.

The European Commission said it would on Friday formally seek feedback from computer manufacturers, software companies and consumers on Microsoft's offer to allow users to pick one of 12 browsers when they install Windows. They have a month to respond to regulators.

If the feedback is positive, the EU could accept Microsoft's offer, which would two months later turn into a legally binding settlement to last five years. A settlement would end the EU antitrust case on browsers without adding to the euro1.7 billion ($2.5 billion) in fines that the company has already racked up.

Smith said the company had made numerous changes to an initial offer made in July after extensive discussions with regulators over the last month. Regulators were scathing about earlier offers, among which Microsoft's announcement in June that it might strip browsers entirely from new European versions of Windows to avoid any antitrust problems.

EU Competition Commissioner Neelie Kroes said "Microsoft's commitments would indeed address our competition concerns" and they would have a "direct and immediate impact on the market."

"It would empower all current and future users of Windows in Europe to choose which browser they wished to use," she said.

She also said she trusted Microsoft to offer developers more interoperability information - data used by other companies to create programs that work on Windows - in a separate deal that will not be enforced by regulators.

"I trust Microsoft. I had contact with (CEO) Steve Ballmer, the (investigation) team is in close contact so there can't be a misunderstanding here," Kroes said. "It's the result of a long discussion over a long period."

European users of Windows XP, Vista and Windows 7 - due to launch on Oct. 22 - will automatically be shown a screen explaining what web browsers are and then get a choice of "tell me more" buttons to give them details on what each browser can do.

They can then pick several browsers - listed in alphabetical order - to install along with or instead of Internet Explorer. They can come back to that screen later to change their browser choice.

Smith confirmed that the company would now push ahead with launching Windows 7 in Europe. Microsoft had earlier hinted that EU antitrust trouble could delay the rollout of the new operating system.

Microsoft's Internet Explorer is the most widely used browser worldwide, but Mozilla Corp.'s Firefox is gaining in popularity.

Microsoft is now focusing on Internet search and hoping to grab a greater share of the market from Google Inc. by striking a deal with Yahoo Inc. to use its Bing search engine to process all Yahoo's search requests and steer search-related ads.

Smith said the antitrust landscape has changed radically and the search market - and Google - was now the focus. "We certainly have our concerns about the lack of competition in search and paid search advertising and we've been explicit about it," he said.

The company had not yet decided whether to ask EU or German regulators to review the deal, he said.

Mozilla and Google Inc. - which recently released its own browser, Chrome - are supporting the case against Microsoft. It was originally triggered by a complaint from Norwegian mobile browser company Opera Software ASA that Microsoft was abusing its monopoly to unfairly squeeze out rivals.

Regulators said they would be able to review how and which browsers are offered to make sure that consumers continue to have "genuine choice."

Kroes said a deal would not allow Microsoft to discriminate against personal computer manufacturers who decided to load PCs with another browser and disable Internet Explorer.

Most people buy the software pre-installed on a computer assembled by manufacturers such as Dell Inc. or Hewlett-Packard Co.

Microsoft has also committed to share more information with software developers for the next 10 years to help them make products compatible with Windows, Windows Server, Office, Exchange and SharePoint. The company published the new offer on its Web site.

Smith said Microsoft will also be required to support industry standards and document how it implements them in its software, including in the browser.

This attempts to answer rivals' complaints that the company does not strictly adhere to industry standards for the Web. Several companies were also unhappy that Microsoft developed its own file format OpenXML instead of using the industry standard Open Document Format for saving documents for archives.

Thomas Vinje, legal counsel for a group of companies that complained about Microsoft's business methods, said the settlement does not seem to deal with the flawed way that Microsoft applies standards, its unfair pricing practices or other concerns about patent abuse or standards manipulation.


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