On 6 March 2013, the European Commission (the “Commission”) fined Microsoft €561 million for failing to comply with commitments to offer a choice of web browsers with its Windows operating system. It is the first time the Commission has imposed a fine for non-compliance with a commitments decision.

Background

In early 2009, the Commission informed Microsoft that it was potentially abusing its dominant position in the market for client personal computer operating systems by tying Internet Explorer to Windows. The Commission deemed that Microsoft gained an artificial distribution advantage unconnected to the merits of its product on more than 90 per cent of personal computers. The Commission also considered that this tying hindered innovation in the market and created artificial incentives for software developers and content providers to design their products or web sites primarily for Internet Explorer.

In late 2009, Microsoft entered into legally binding commitments to offer European users of Windows a choice of different web browsers and to allow computer manufacturers and users the possibility to turn Internet Explorer off. Essentially, Microsoft committed for a five year period to generate a "choice screen" so that users of the Windows operating system could choose which web browser(s) they wanted to install. Initially, the company complied and users reacted positively to the choice. The Commission indicated that it had gathered evidence suggesting that Microsoft stopped displaying the choice screen in early 2011 following the company's launch of its Windows 7 Service Pack 1. Further, that Microsoft failed to provide the choice screen during the period from May 2011 to July 2012 affecting approximately 15 million users. Microsoft pointed to a ‘technical error’ that caused the problem.

Fine

Under Article 23(2) of Regulation 1/2003, the Commission may impose fines of up to 10 per cent of total turnover on companies which fail to comply with commitments they have given. This is the first time the Commission has done so. In calculating the fine, the Commission considered the gravity and duration of the infringement, the deterrent effect and, as a mitigating factor, the fact that Microsoft cooperated with the Commission’s investigation.

Significance

Levying fines for competition infringements is intended to send signals to companies to discourage them from breaching competition law. Often companies offer commitments in order to avoid paying fines, although complying with commitments in itself may be expensive for them. Commitments allow investigations to be closed faster (which can benefit both sides) and no formal finding of infringement is made against the company. On the other hand, prohibition decisions, as opposed to commitments, make a finding of infringement and set a much stronger precedent for future cases.

The Commission (and the Irish Competition Authority) tend to prefer structural commitments as they are generally more effective than behavioural commitments (like the browser choice commitments by Microsoft). Structural commitments generally do not require oversight by the Commission. Checking compliance with behavioural commitments which relate to specific conduct of a dominant company is a difficult and resource-intensive task. Nevertheless, the Commission’s finding in this case shows that it is prepared to put the effort into monitoring behavioural commitments – this can be through companies’ reporting obligations, vigilance of other market players and/orby appointing an independent monitoring trustee.

As a result of this investigation, the Commission has stated that it will monitor companies’ conformity with commitments more closely and will be stricter in designing its monitoring tools.