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European Commission fines Microsoft, warns others

In an unprecedented move Wednesday, the European Commission fined Microsoft Corp for failing to follow through on a commitment it made to give customers a clear choice of web browser. The fine of 561 million euros ($731 million) represents 1 percent of Microsoft's annual sales. 

By Foo Yun CheeReuters / March 7, 2013

European Commissioner for Competition Joaquin Almunia speaks at EU headquarters in Brussels on Wednesday. The European Union Commission fined Microsoft euro 561 million (US dollars 733 million) for breaking the terms of an earlier agreement to offer users a choice of internet browser.

AP Photo/Virginia Mayo

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BRUSSELS

The European Union fined Microsoft Corp 561 million euros ($731 million) on Wednesday for failing to offer users a choice of Web browser, an unprecedented sanction that will act as a warning to other firms involved in EU antitrust disputes.   

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It said the U.S. software company had broken a legally binding commitment made in 2009 to ensure that consumers had a choice of how they access the internet, rather than defaulting to Microsoft's Explorer browser.   

An investigation found that Microsoft had failed to honor that obligation in software issued between May 2011 and July 2012, meaning 15 million users were not given a choice.   

It is the first time the European Commission, the EU's anti-trust authority, has handed down a fine to a company for failing to meet its obligations.    

While the sanction is sizeable, representing more than 11 percent of Microsoft's expected net profit this quarter and 1 percent of annual sales, the Commission could have charged the company up to 10 percent of annual global revenue.    

The world's largest software company can easily pay the fine out of its $68 billion in cash reserves. It holds $61 billion of that outside the United States, much of it in Europe, to take advantage of low tax rates.   

Microsoft shares fell 0.9 percent to $28.09 on Nasdaq.    

"If companies agree to offer commitments which then become legally binding, they must do what they have committed to do or face the consequences," Joaquin Almunia, the EU's competition commissioner, told a news conference.   

"I hope this decision will make companies think twice beforethey even think of intentionally breaching their obligations oreven of neglecting their duty to ensure strict compliance."   

Microsoft said it took full responsibility for the incident,which it has blamed on a technical error. The board cut chiefexecutive Steve Ballmer's bonus last year partly as a result,and also faulted former Windows head Steven Sinofsky who leftthe company last year for unrelated reasons.   

The company did not say whether it would challenge theruling, but it is not expected to do so, largely so as not toantagonise regulators.   

"We have apologized for it," Microsoft said in a statement.   

"We provided the Commission with a complete and candidassessment of the situation, and we have taken steps tostrengthen our software development and other processes to helpavoid this mistake - or anything similar - in the future."   

Almunia said regulators may have made a mistake by allowingMicrosoft to police its own behaviour instead of appointing anexternal trustee to ensure compliance with the commitments.   

"In 2009, we were even more naive than today," he said.           

Waring shot to Google, others    

Microsoft's fine is a good example of the Commission's hardline approach toward companies which disregard rules whetherdeliberately or not, said Charles Whiddington, a partner atLondon-based law firm Field Fisher Waterhouse.   

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