Microsoft executives have settled a year-long legal battle with a shareholder who wanted answers after a software glitch in 2011 caused the company to be fined $732 million for a defying antitrust laws in Europe.
Kim Barovic sued Microsoft’s board members last year, arguing they failed to fulfill their fiduciary duties when they let a “technical error” cause Windows to only come preinstalled with Microsoft’s own Internet Explorer web browser — without a “choice screen” offering other options — which defied regulations from the European Commission.
Barovic eventually got her wish, as Microsoft notified shareholders on Friday of a settlement aimed at formalizing efforts already in place and increasing internal oversight of antitrust issues moving forward.
“In 2013 we committed to steps to prevent future errors and we’re pleased to settle this matter by adding new resources and processes to the work already underway,” a Microsoft spokeswoman told GeekWire in an official statement.
The biggest change will be the creation of a new independent Antitrust Compliance Office, which will hire outside counsel and report directly to the company’s Regulatory and Public Policy Committee. Essentially, it will serve as a watchdog to make sure Microsoft stays in compliance with antitrust laws and doesn’t have another mishap that leads to a massive fine.
As part of the settlement, Microsoft has agreed to set aside up to $42 million to fund the compliance office and other efforts for at least the next five years. Barovic will not receive any money from the settlement.
The fine that started everything dates back to 2009, when the European Commission raised antitrust concerns over Microsoft’s exclusive inclusion of its Explorer web browser with the Windows operating system. Microsoft, in turn, agreed to show users a “Browser Choice Screen” that would let them opt in to a competitor’s offering.
But Microsoft says a software glitch with a Windows 7 update in 2011 got rid of the Browser Choice Screen for 15 million users, meaning it had accidentally defied its agreement with the European Commission for about a year.
Microsoft was fined 561 million euros for the error in March 2013, which was approximately $732 million at the time.
In the notification filed with the SEC on Friday, Microsoft’s broad maintained that it had not broken any laws or defied any fiduciary duties. Instead, the defendants reported they reached the settlement because “it will eliminate the uncertainty, distraction, disruption, burden, risk, and expense of further litigation. Further, Defendants have acknowledged that the Settlement is fair, reasonable, adequate, and in the best interests of Microsoft and Current Microsoft Shareholders.”
