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Saturday, July 21, 2012

Microsoft did it again ?

From the old times we know that errare humanum est, perseverare diabolicum

This means, in legal terms, that the recidivism will increase the charges of the infringer.

Let's remember some facts.
On 27 June 2012, the software giant received a blow from the General Court, which upheld the penalty payment received by Microsoft as a result of the failure to fully apply the 2004 European Commission decision forcing it to ensure interoperability of other software producers to the PC operating systems for which the US company is a dominant supplier. The General Court only accepted a minor reduction of the penalty from 899 million EUR to 860 million EUR.

In February 2008, the Commission found that Microsoft, although it has provided access, it was charging the other software producers very high royalties.  As a result of the statement of objections received from the European Commission, Microsoft reduced its royalties from 3,87% for a patent license  (total license) and 2,89% for an information license (partial license), down to 0,4% and a fix fee of 10.000 EUR, respectively.  (Interestingly, the analysis of the Commission was similar to an excessive pricing case).

On a different abuse of dominant case against Microsoft, regarding the bundling of its internet navigation browser Internet Explorer with its operation system, the European Commission accepted a commitment made by Microsoft, in 2009, to offer its customers a choice of 12 alternative web browsers through a "Browser Choice Screen - BCS", or the "ballot screen", automatically displayed when installing the operating system on a computer.

In the same time when the General Court was delivering its ruling on the penalty payment, the incredible happened - the Commission opened an investigation in what looks to be a failure by Microsoft to include BCS in its updated version of Windows 7 operating system, sold in Europe since February 2011.  Some 28 million computers were deprived from the possibility to choose among various web browsers. 
Interestingly, this time Microsoft took a - perhaps, wise - decision to admit its fault, which, according to the company, was due to a ”technical error” - see the full statement here -

If first time - the interoperability issue - Microsoft claimed that the decision issued by the European Commission was not clear enough, in this second case, it admitted its fault, it took the road of full cooperation: it immediately fixed the problem through a service pack and it also undertook to extend the applicability of the BCS with 15 months.  Microsoft took another measure - it commissioned an outside investigation into the reasons of the failure - which looks merely as an attempt to demonstrate that the failure was beyond its control and in spite of the measures put in place to this purpose.

The outcome of this situation is difficult to assess now but the perspective looks grim for Microsoft.  

This failure is in the same time a premiere in EU competition enforcement - first time commitments are breached - but Microsoft is a repeated offender of the measures imposed through an European Commission decision.  Looking at the history of the relations between Microsoft and the European Commission, I would not say that Microsoft is a "dear friend" to the latter.  

The European Commission will be right in imposing severe fines to Microsoft (these may go as high as 7 billion EUR) because such errors are almost inconceivable for a corporation of its size and due to its tormented history with the EU competition watchdog.  

The Commission should take into account, however, all the relevant facts, such as:
- the effectiveness of the internal procedures of Microsoft.
- the extent to which the market was affected in terms of number of users and the share in the total software sold by Windows in this time - including Windows XP and Vista.
- most important - the Commission should give attention to the current behaviour of the consumers - the commitments were meant also to encourage and educate consumers to choose alternative web browsers.  

The situation is different now compared to 2009 and consumers are much more aware of their rights and of the possibilities available to them. The worldwide market share of Internet Explorer is of 32,31% as of June 2012, below Google's Chrome which stands at 32,76% ( 
According to WikiMedia, the IE share is of 24,42% and Chrome's share stood much higher at 27.06%.
Microsoft is down from almost 70% in 2009 when the commitments were accepted by the European Commission.
Last but not least, is no longer the most used web browser within the European Union, except UK and the northern countries, as it was exceeded in most member states by Chrome and Firefox.

In conclusion, the European Commission should be tough on Microsoft but, in the same time, it should give careful consideration to the current framework (such as the framework for the monitoring trustees) and the possible evolutions in the market.  
Any opinions expressed on the are the personal views of the author and cannot be construed in any way as representing the opinion of the Romanian Competition Council.

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