In a move that could prove a watershed moment for competition law enforcement in the European Union, the EU Commission on 24 October 2012 for the first time issued proceedings against a party for breaching commitments given to settle a competition law case. The outcome of these proceedings, brought in a high profile case against Microsoft, will do much to determine how seriously EU Commission settlements are taken as an enforcement mechanism in future.

Microsoft had given commitments to the Commission to settle the proceedings brought against it in January 2009 for abusing its dominance in the market for PC operating systems by tying in its own Internet Explorer (“IE”) web browser when selling licences to Windows, contrary to Article 102 of the Treaty on the Functioning of the EU. The Commission was empowered in 2004 to accept binding commitments from competition law infringers in settlement of cases it brings against them, pursuant to Article 9 of EC Regulation 1/2003.

The ability to settle cases in this way was seen as a major step forward for addressing anti-competitive conduct, especially in the rapidly shifting high-tech sector. Parties failing to observe commitments given to the Commission can in theory be fined for up to 10% of their worldwide turnover (and, in addition, periodic penalty payments of up to 5% of average daily turnover) for the preceding business year. However, up to now the Commission has not invoked these sanctions.

After negotiations with the Commission Microsoft committed itself for a five year period beginning in March 2010 to:

  1. make it possible within Windows 7 and successor systems for original equipment manufacturers and end users to switch IE on and off; and
  2. to provide a “Choice Screen” giving users the opportunity to set an alternative, competing web browser as their default browser, displaying the 12 most popular browsers on the market in a fair and unbiased way.

The Commission’s case relates to Microsoft’s failure to incorporate the Choice Screen in Windows 7 Service Pack 1, from its release in February 2011 through to July 2012, when the Commission opened its investigation into the issue. Microsoft now has the option of writing back to the Commission or requesting a hearing.

The outcome of these proceedings will be followed with keen interest. Microsoft has been one of the Commission’s highest profile targets and securing the processing giant’s compliance with the terms of the 2009 settlement will show that the commitments regime has teeth. Otherwise, the procedure will seem weak and other parties subject to commitments, notably Google (see our June 2012 Briefing: Commission demands remedies from Google for alleged abuse of dominance - biggest case since Microsoft?), will become confident that they can get away with not fulfilling the promises they have made. Such an outcome would mean that the Commission’s Article 9 powers have been seriously undermined.