The European Commission this morning fined Microsoft 561 million euros, approximately $732 million, for neglecting to include a required “browser ballot” in Windows 7 for the better part of a year —the first time the commission has fined a company for failing to comply with an antitrust ruling.

That’s almost 1 percent of Microsoft’s annual revenue of $73.72 billion for its 2012 fiscal year.

“Legally binding commitments reached in antitrust decisions play a very important role in our enforcement policy because they allow for rapid solutions to competition problems. Of course, such decisions require strict compliance,” said EU antitrust commissioner Joaquín Almunia in a statement. “A failure to comply is a very serious infringement that must be sanctioned accordingly.”

Regulators had been investigating the company over its failure to include a required “browser ballot” in a Windows 7 update. The ballot was a required by the company’s 2009 EU antitrust settlement — designed to level the playing field between Microsoft’s Internet Explorer and competing browsers.

Microsoft issued this statement on the fine: “We take full responsibility for the technical error that caused this problem and have apologized for it. We provided the Commission with a complete and candid assessment of the situation, and we have taken steps to strengthen our software development and other processes to help avoid this mistake – or anything similar – in the future.”

The company had distributed an update with the browser ballot, retained outside counsel to investigate the situation, and offered to extend the length of the agreement with the commission for 15 months beyond the original plan.

The mistake was one of the reasons cited by Microsoft’s board when it gave Steve Ballmer and then-Windows chief Steven Sinofsky bonuses that were less than their targets for last year.

EU regulators can impose fines of up to 10 percent of annual revenue, which would have been more than $7 billion based on Microsoft’s fiscal 2012 results. The Redmond company had more than $68 billion in cash and short term investments as of Dec. 31, 2012.

Comments

  • Taxman

    Lucky for Microsoft they can use their overseas cash to pay this fine. And it ensures the EU isn’t overly strict when member countries scrutinize Microsoft for tax evasion.

    • Idiot boy

      Duh. The EU will be all over any future transgression, assuming it can be proved and not just alleged.

  • michael03m

    Socialist Europe strikes again!

    • Ken

      Yeah, Socialist Europe made MS not live up to its legal obligations.

      • michael

        Legal obligations set forth in Socialist Europe. Government has no role in telling businesses what they’re allowed to do with their own products. Its incomprehensible to me how these kind of regulations don’t infuriate people.

        • asok1421

          Is it not the role of government to promote a true free market for the benefit if its citizens? Or are you arguing that pathological outcomes such as monopolies better serve a country and its citizens? Robber Baron much?

          • guest

            How does providing a browser ballot screen when anybody with an internet connection was able to easily load FF, Chrome, Safari, or a number of others browsers – and did – promote a freer market? How does selectively placing that restriction on Windows while exempting iOS or Android accomplish that? You realize that in the tablet market, for example, Apple has enjoyed what many would define as monopoly share for years, or that Android is rapidly getting there in mobile? Promoting free markets sounds good in theory. The problem is that history shows Governments generally suck worse at regulating markets than the market itself. Indeed you could make a great argument that it was ultimately the market, not the DOJ, that leveled the playing field regarding MS.

            Monopolies are not ipso facto pathological. There are numerous examples of them occurring naturally. The US court found that MS’s did, for example. Another example might be Google, which enjoys search share in excess of 90% in many parts of the world, including much of Europe. Should the EU place severe constraints on their ability to operate as a result? If they don’t but did with MS, how does make for a free market?

        • Ken

          “Capitalist America” set the precedent for telling MS what it could do with their own products long before Europe did. But how you feel about Government intervention in business, be it in Europe or America, is moot. All that matters is that MS had a legal obligation which it was well aware of, knew the penalty if it didn’t abide by it, had total control over ensuring it didn’t, but still failed to do so through its own mismanagement. MS’s own legal team agreed with that. When you break the law you generally face a consequence, in any jurisdiction.

  • guest

    Dodged a bullet there. But that’s still 3/4 of billion that was needlessly lost due to abject management incompetence. .

  • Dump MonkeyBoy

    I’m sure a letter of apology from Ballmer to all MS shareholders will be forthcoming shortly. /s

  • firby

    Enjoy your ill-gotten gains EU. Should keep you solvent for a little longer.

    • greatbigsea

      Too true :) Still waiting for the EU to go after Apple, but not holding my breath…

  • Guest

    We’d recommend that Microsoft pay the bill in euros. You’ll be able to buy half a billion E for a few pennies before the end of the decade.

    • Guest

      Or MS shares…

      • Guest

        Yes! Issuing 561 million “Class E” shares, each valued at “1 euro” and not tradeable on the public markets, would be a brilliant way to pay this fine. I like that strategy.

        • guest

          No need to complicate it. Just gave them the common. Same end result.

  • http://www.christopherbudd.com Christopher Budd

    Here’s my (VERY light) question: Why 561 Million? Why not 560? Just seems kind of odd to be not a round number.

    But these are the things that keep me up nights.

    • http://geekwire.com Todd Bishop

      My guess is that they converted Microsoft’s global FY12 revenue to Euros, and then took 1 percent of it. So it depended on the exchange rate on whatever day they did that, which resulted in the weird number.

      • http://www.christopherbudd.com Christopher Budd

        Ah OK. That almost sounds like a word problem.

        “You’re a European antitrust regulator. You just found a major American software company guilty of violating an antitrust ruling. You’ve decided to fine them 1% of their revenue for last year. Their last year’s revenues were US $73.72 billion. You must calculate the fine in Euros and show the result in US dollars as well. The exchange rate is US$ 1 = .77 Euros. Show your work or no credit will be given.”

  • http://www.facebook.com/kmorrill Kevin Morrill

    Now Microsoft will spend thousands more man hours developing and testing
    silly stuff the EU wants that has nothing to do with customer benefit.
    Instead of $700 M being returned to shareholders, it can now be
    frittered away by EU on agriculture subsidies (aka votes).

    • guest

      It was already built. All MS had to do was make sure a service pack didn’t break it. Even MS’s inefficient and bureaucratic system can handle that minor task for a lot less than $732M, not to mention damage to reputation. And that money was never going to shareholders. So that’s a false argument. MS has repeatedly refused to repatriate and payout those funds despite the terrible ongoing performance of the stock. Sort of like Dell, until of course Michael et al decided to buy the company. Then suddenly their previous objections to repatriation disappeared…

      • firvy

        “damage to reputation” – please – the EU is an annoying pissant with an unfortunate ability to levy fines like these. My opinion of MS hasn’t changed, my only reaction to this is frustration that American companies have to deal with this crap.

        • guest

          For more than year MS failed to notice that the ballot screen had been dropped from its own product, Windows. It never did catch the failure; it had to be informed of said by the EU, following a complaint. That mismanagement, which was splashed across every media outlet at the time, put MS at risk of paying a fine of up to $7 billion, in addition to the billions it already had to shell out when the EU found it guilty originally. $7 billion, in case you’re unaware, is enough to wipe out an entire quarter of MS’s earnings and then some. So for the past 90 days, current/potential MS investors have had to fret about how large the final judgment would be. As it is, at “just” $732M, it will still have a significant adverse impact this quarter. And of course the final judgment and fine got splashed across every major media outlet all over again. In fact MS earns the added distinction of being the only company in EU history to EVER fail to comply and require a fine. If you think none of that damages the reputation of the company or its management, then you’re delusional.

  • guest

    3/4 billion EU fine, PCs growth estimates cut again and now calling for declines through 2017, Surface RT a dismal failure, WinRT effectively DOA, W8 off to a slow start on the desktop w OEMs admitting it hasn’t been well received, the risky W8 UI hasn’t even paid off where it was targeted: tablets, WP8 unable to even stem continued share losses in America let alone significantly enhance it anywhere else, and Yahoo cozying up to Google.

    And we still have three months left in “the most epic year in Microsoft history” that Steve Ballmer promised.
    Fire Ballmer. Fire the Board. Start Over.

  • http://twitter.com/TechsUK Mark Taylor

    Any other EU users annoyed by this? we all had our IE icons deleted from our start menu/screens, unpinned from task bar and removed from the desktop. Then forced to choose browser (again), plus only instructions on how to restore the icon, not automatically restore. I complained to the EU commission about it. They ‘value citizens opinions’ they said. I’m not an EU citizen, I’m British.
    What makes it worse, the EU won’t share that dosh out amongst all the victims of this outrageous software company that provides a means of browsing the Internet.
    ;-)

Job Listings on GeekWork