Microsoft Nearing Antitrust Settlement with Europe

Microsoft's long-running battles with the European Commission over antitrust issues could end by the end of the year, with Microsoft agreeing to implement the commission's requests with regard to Internet Explorer and product interoperability. After a summer of negotiations and much back-and-forth, Microsoft proposed introducing a browser "ballot screen" to its upcoming Windows 7 that would give European consumers a choice of rival programs.

Microsoft could settle its outstanding antitrust issues with the European Commission by the end of the year, according to statements issued by both parties on Oct. 7. The news comes after months of negotiations over Microsoft's inclusion of its newest browser, Internet Explorer 8, into the upcoming Windows 7 operating system.

According to The Wall Street Journal, Competition Commissioner Neelie Kroes stated that she was "very hopeful" that all Microsoft-related issues would be settled "before the end of the year." In a press conference in Brussels, Kroes suggested that she trusted Microsoft with regard to the deal, and that she had been in discussions with Microsoft CEO Steve Ballmer.

The European Commission has the power to investigate possible violations of European Union antitrust rules and apply fines as it deems appropriate.

Key to the antitrust issues being resolved is Microsoft making concessions to the commission in two antitrust cases, one dealing with Internet Explorer integrated into Windows and the other with rival companies' interoperability with Microsoft products.

"The Commission's concern has been that PC users should have an effective and unbiased choice between Internet Explorer and competing web browsers," the European Commission wrote in an Oct. 7 statement. "The Commission's preliminary view is that Microsoft's commitments would address these competition concerns and is market testing Microsoft's proposal in light of these requirements."

In response to antitrust concerns, Microsoft originally planned on shipping a separate version of Windows 7 to the European market that would have lacked Internet Explorer 8. However, Redmond then reversed strategy in August, instead choosing to ship Windows 7 with the browser in place, along with an automatic "ballot screen" that lets users select between IE 8 and a competing browser.

A sample screen provided by Microsoft showed rival browsers such as Mozilla Firefox and Google Chrome being given an equal amount of on-screen space. The strategy initially carried some risk for Microsoft, as it announced the strategy before the commission completed its review of the proposal. In the event of the antitrust body's rejection of the ballot screen, Redmond would have been forced to retreat to its old position and release an IE-free version of Windows 7, which it intended to call Windows 7 E.

However, the commission now seems publicly willing to put the Microsoft ballot-screen offer before consumers. An agreement for a European ballot screen would have a five-year lifespan, according to Microsoft, which agreed to implement 20 changes to its initial proposal.

As part of those changes, Microsoft will "ensure equivalent placement on the Windows 7 taskbar for Internet Explorer and all other browser icons," adjust the ballot screen so Internet Explorer is no longer listed first, and add introductory information.

"We welcome today's announcement by the European Commission to move forward with formal market testing of Microsoft's proposal relating to Web browser choice in Europe," Brad Smith, Microsoft's general counsel, wrote in an Oct. 7 statement. "We also welcome the opportunity to take the next step in the process regarding our proposal to promote interoperability with a broad range of our products."

With regard to the interoperability case, Smith said that "Microsoft's proposed undertaking will ensure that developers throughout the industry, including in the open-source community, will have access to technical documentation to assist them in building products that work well with Microsoft products.

"Microsoft will also be required to support certain industry standards in its products and to fully document how these standards are supported," Smith added. "Microsoft's proposed undertaking will make available legally binding warranties that would be offered to third parties."

The commission wanted other companies to have access to technical specifications that enabled interoperability, and to have those specifications offered at "fair royalty rates, based on the inherent value of the technology disclosed," according to the statement. Microsoft claims that its new initiative will "implement this approach in full."

Microsoft likely has little desire to continue its antitrust battles in Europe, which have resulted in the company being hit with fines of nearly 1.2 million euros over the years.