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The European Union's antritrust regulator has levied an excessive and pointless penalty against Microsoft for a careless oversight by the software giant. The €561-million fine ($732-million) is a costly reminder that companies that make promises to regulators need to live up to them. That should be obvious. Equally obvious is the message that large, successful tech companies operating in Europe should be cynical and keep a chequebook handy – bending over backwards for regulators is a cost of doing business in the Old World. No doubt Google, which is embroiled in discussions with the EU in a separate anti-trust matter, is starting to wonder how much its settlement will cost.
Microsoft's crime is sloppiness. In 2009, it promised to disentangle Internet Explorer from its Windows operating system, making users aware that they could download competing browsers rather than defaulting to IE. That was supposed to settle years of squabbles with the EU competition commission that had seen Microsoft pay €1.6-billion in fines, mostly for not complying with past orders.
But then last July, Microsoft admitted it had fallen short on its pledge. It blamed a technical error, saying the browser choice software that was supposed to be part of a service pack update to its Windows 7 operating system was somehow missing from updates sent to 28 million customers. The company apologized and moved quickly to fix the problem.
There's no question a mistake like this should have been avoided – it cost CEO Steve Ballmer his bonus. But even though some commentators have noted the punishment could have been worse – up to 10 per cent of Microsoft revenues, compared to the 1 per cent level of the fine – the absolute number is still huge.
The penalty is even more ludicrous when you consider what the settlement was meant to address: Microsoft's domination of the web browser business. According to web analytics firm StatCounter, Internet Explorer's share of the European browser market was already in steep decline in 2009. It has continued to sag, dropping from close to 60 per cent in August 2008 to 24 per cent last month, good for only third place behind Google's Chrome and Mozilla's Firefox browsers. Microsoft is paying for winning the browser war that it is actually losing. European regulators demands may be Draconian, but even tech giants can't afford to keep on running afoul of them, at these prices.
Sean Silcoff is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here for more of his Insights, and follow Sean on Twitter at @seansilcoff.