European Commission Probes Microsoft Again: Failure to Comply With Commitments Will Not be Tolerated
Wednesday, August 22, 2012

The European Commission (Commission) has made clear that it is pursuing a broader policy objective of ensuring swift finality to cases in dynamic markets through settlements and commitments. The Commission believes that this serves the consumer better than fining decisions after years of investigations. Such a policy can only be effective, however, if the commitments are properly observed by the companies involved and monitored by the authorities. The Commission is clearly willing to step up monitoring efforts.


On 17 July 2012, the EU’s top antitrust regulator announced the launching of an investigation into allegations that Microsoft failed to comply with a commitment made in 2009 to make a browser-choice screen available to PC users. Should the allegations prove to be true, a decision against Microsoft would be of two-fold significance: not only would a formal finding of non-compliance be the first time that a company had defied a settlement agreement with the Commission, but it sends a strong signal to companies that failure to comply with the terms of a settlement will not be tolerated.

Background

On 16 December 2009, the Commission rendered a decision under Article 9 of Regulation 1/2003 that rendered legally binding commitments offered by Microsoft to encourage competition on the web browser market. The commitments were made to address concerns that Microsoft may have tied its web browser Internet Explorer to the Windows PC operating system in breach of the of EU rules on abuse of dominance (Article 102 TFEU).

Under the commitments approved by the Commission, Microsoft promised to make available for five years a “choice screen” enabling users of Windows XP, Windows Vista and Windows 7 to choose which web browser(s) they want to install in addition to, or instead of, Internet Explorer. The commitments also provided that computer manufacturers will be able to install competing web browsers, set these as default, and switch Internet Explorer off.

Allegations have been made by third-parties that Microsoft failed – between February 2011 and today - to abide by the promises it made in relation to the automatic appearance of the browser-choice screen on PCs. Despite the success of the remedy in opening up the web browser market, witness the exponential rise in market share of Firefox and Chrome, it is estimated that because of Microsoft’s alleged failure to fully comply with the commitments it made, 28 million users may not have seen the choice screen at all. Should the allegations prove true, Microsoft potentially faces another huge fine (up to 10% of its total turnover)

The Microsoft settlement in its broader context

Settlement (or commitment) decisions under Article 9 of Regulation 1/2003 – a specific form of EU settlement mechanism embedded in the EU’s statute on antitrust procedure – is conceived as a substitute for fully-fledged infringement decisions. They are monitored by the Commission often via trustees vested with the responsibility of reporting on compliance therewith. The interest in Article 9 settlement decisions - as opposed to fully-fledged infringement decisions which often take years to emerge - lies in a swift resolution to cases with its attendant benefits for both the regulator and the party concerned. This is of particular significance in fast-moving markets characterised by frequent technological advancements where the competitive landscape can change dramatically in a short space of time.

Settlement decisions are therefore a preferred remedy of choice for both the Commission and companies operating in dynamic markets. Testimony of this is borne by the number of recent speeches made by the head of antitrust at the Commission, Commissioner Almunia, confirming this but also by the string of cases resolved in this manner. To name a pertinent example in high- tech markets other than web browsers, IBM at the end of 2011 offered acceptable commitments to address competition concerns arising from an investigation by the Commission in the maintenance market for IBM mainframe hardware and operating system software products. It is, furthermore, an instrument that may be employed in the ongoing investigation into Google’s alleged abuse of a dominant position in online search.

The Future

The announced investigation into Microsoft’s alleged failure to comply with its promises serves as a sobering reminder that compliance with the regulator’s decisions are taken very seriously and that the settlement of a case is far from the end of the story. Failure to comply carries a risk of heavy fines and a re-opening of proceedings. The message is therefore loud and clear: effective and ongoing compliance is a must.

*Michal Kocon, a trainee solicitor in the Brussles office, also contributed to this article.

 

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