$713m fine as Microsoft caught with its browsers up

The European Union fined Microsoft $US732 million ($713 million) on Wednesday for failing to respect an antitrust settlement with regulators. But in a highly unusual mea culpa, the EU's top antitrust regulator said his department bore some of the responsibility for Microsoft's failure to respect a settlement that caused the fine.

EU competition commissioner Joaquin Almunia said the bloc had been "naive" to put Microsoft in charge of monitoring its adherence to the deal it agreed to in 2009, when his predecessor let the company escape a fine in exchange for offering users of its Windows software a wider choice of internet browsers.

Mr Almunia insisted the enforcement of settlements could be sufficiently strengthened to ensure companies abide by their pledges, and signalled he would not retreat from his goal to use such deals to avoid lengthy legal battles with companies in swiftly evolving technology markets.

Settlements "allow for rapid solutions to competition problems", Mr Almunia said. "Of course such decisions require strict compliance" and the "failure to comply is a very serious infringement that must be sanctioned accordingly."

Microsoft agreed to alter Windows for five years to give users of new computers in Europe a ballot screen that would allow them to easily download other browsers from the internet and to turn off Microsoft's browser, Internet Explorer.

Microsoft told the commission at the end of 2011 that it had been abiding by the deal. "We trusted the reports about the compliance," Mr Almunia said Wednesday.

In fact, the company failed to include the ballot system in certain products starting in May 2011, affecting more than 15 million European users. The lapse came to light in July after rival companies reported its absence.

"We take full responsibility for the technical error that caused this problem and have apologised," Microsoft said.

"We have taken steps to strengthen our software development and other processes to help avoid this mistake - or anything similar - in the future."

A Microsoft spokesman declined to comment on whether the company would appeal, but it seemed unlikely, as the company prefers to focus on its rivalry with Google. Microsoft is among the companies that have complained about Google's business practices to Mr Almunia.

In the Microsoft case, Mr Almunia said some of the blame rested with regulators and indicated that the commission might never again, in effect, put the fox in charge of the henhouse.

He said the commission would be more inclined to use trustees to police future settlements, would be more precise in defining their responsibilities and would "pay even more attention to the reports that the monitoring trustees will send to us".

The decision against Microsoft was a milestone for EU antitrust law, and for Microsoft, which became the first company to be punished for failing to adhere to a settlement.

Although the commission can levy fines of up to 10 per cent of a company's most recent global annual sales, the penalty issued this week represented 1 per cent of Microsoft's sales, partly because it co-operated with the commission after the issue was revealed.

Mr Almunia said there had been no indication that Microsoft intentionally broke the settlement agreement. The fact that nobody - apart, apparently, from rival companies - noticed the absence of the browser choice screen for more than a year has prompted critics of the European antitrust enforcement to question the effectiveness of the measure.