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Europe Fines Microsoft $732 Million Over Antitrust Law

March 6, 2013 by Leave a Comment

Joaquín Almunia, the E.U. competition commissioner, said the Union had been “naïve” 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.

But Mr. Almunia insisted that the enforcement of settlements could be sufficiently strengthened to ensure that companies abide by their pledges, and he signaled that he would not retreat from his goal to use such deals to avoid lengthy legal battles with major 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 newly purchased computers in Europe a ballot screen that would allow them to easily download other browsers from the Internet and to turn off Microsoft’s own 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 had 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 2012, after rival companies reported its absence.

“We take full responsibility for the technical error that caused this problem and have apologized,” Microsoft said Wednesday. “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

The fine comes as Mr. Almunia’s office is negotiating with Google to try to resolve the commission’s concerns about the way it runs its Internet search service and its advertising business.

Mr. Almunia said Wednesday that attempts to reach a deal with Google were continuing and were unrelated to the decision taken against Microsoft. But he made it clear that the substantial fine was meant to serve as a warning to others.

If Google eventually settles, it “will have to exert extra care to not give the impression that it is deviating from the commitments that such a settlement will entail” to avoid a similarly high fine, Mario Mariniello, a research fellow at Bruegel in Brussels and a former antitrust official, wrote in a blog post.

But 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.

“Maybe we should have tried to complement the responsibilities of the reports about the implementation, but we only reacted when we received the first complaint,” Mr. Almunia said. “Maybe in 2009 we were even more naïve than today.”

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.”

Companies that agree to settlements usually pay for trustees, but the choices are vetted for conflicts of interest, according to E.U. officials.

Since 2003, when the current settlement rule was introduced, the commission has taken 29 such decisions. But there were no appointments of independent monitoring trustees in the majority of those cases, including in a settlement with I.B.M. in late 2011.

Mr. Almunia said he had not yet decided whether to appoint a trustee to oversee whether Microsoft was adhering to the rest of its compliance period in the browser case, which runs to 2014.

Microsoft has been a special case in the history of E.U. antitrust enforcement, racking up a total of €2.26 billion, or $3.4 billion, in fines over about a decade.

Microsoft was the first company to pay so-called periodic penalties for failing to follow an order to make it easier for rival products to communicate with powerful server computers running Windows. That amount, nearly €900 million, was subsequently reduced to €860 million after the company appealed to the General Court of the European Union.

The decision against Microsoft was another milestone for E.U. 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 10 percent of a company’s most recent global annual sales, the penalty on Wednesday represented 1 percent of Microsoft’s annual sales, partly because the company cooperated with the commission after the issue came to light.

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.

But Mr. Almunia insisted Wednesday that the remedy had been effective, saying that, “our decision was very relevant in opening the market and broadening the choice for users, for what kind of browsers they want to use.”

Microsoft, which currently offers a browser choice in its latest Windows 8 operating systems in Europe, said last year that it was prepared to extend the system beyond 2014 by an additional 15 months, partly to atone for its error. But it remained unclear on Wednesday whether that plan would go forward.

This article has been revised to reflect the following correction:

Correction: March 6, 2013

An earlier version of this article misstated the 14-month period in which, according to European officials, Microsoft failed to offer a choice of browsers to more than 15 million European users of the Windows 7 SP1 version. It was in 2011 and 2012, not from 2011 to 2014.

Article source: http://www.nytimes.com/2013/03/07/technology/eu-fines-microsoft-over-browser.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Google Submits Proposal in Bid to Resolve E.U. Antitrust Case

February 1, 2013 by Leave a Comment

“To be seen as a success, any settlement must include specific measures to restore competition and allow other parties to compete effectively on a level playing field,” David Wood, legal counsel for ICOMP, a group backed by Microsoft, said in a statement.

Michael Weber, chief executive of an online mapping service called hot-map.com, based in Germany, said he hoped the offer by Google was “enough to restore competition” but, “if not, we will take into account all legal options we have and we won’t hesitate to use them.”

Companies that have complained against Google in Europe will have the option to sue the European Commission, the Union’s executive arm, at the General Court of the European Court of Justice in Luxembourg for failing to push hard enough for an effective solution. Such cases can take years to reach a final judgment.

Neither the company nor European officials were willing Friday to describe the settlement proposals. But it had been expected that Google would offer revisions to the way it conducts its online search business in Europe to address regulators’ concerns that the company’s activities are unfair to other Web publishers and its online competitors.

The commission has taken a tougher line with Google than the U.S. Federal Trade Commission, which decided in January that the company had not broken antitrust laws after a 19-month inquiry into how it operated its search engine.

Joaquín Almunia, the European competition commissioner and top E.U. antitrust official, has been formally investigating Google since November 2010. He has insisted that Google make changes to the most sensitive area of its business, online search.

If Mr. Almunia ultimately accepts Google’s offer, the company would avoid further investigation that could lead to a fine of as much as 10 percent of its annual global sales, which came to about $50 billion last year. Google would also avoid a guilty finding that could restrict its activities in Europe.

“We continue to work cooperatively with the commission,” Al Verney, a spokesman for Google in Brussels, said Friday.

Antoine Colombani, a spokesman for Mr. Almunia, told a news conference Friday that Google had sent “a detailed proposal,” which the commission was analyzing before taking any further steps.

But there is no formal timeline in European antitrust cases, meaning negotiations could continue.

“I can’t anticipate the timing or the substance of the analysis,” said Mr. Colombani.

Mr. Almunia could still take a far more confrontational stance with Google by sending the company a Statement of Objections, which is the European equivalent of formal antitrust charges. But that is something Mr. Almunia has been seeking to avoid because he favors non-litigious solutions to antitrust problems, particularly in the fast-moving technology field, to prevent cases from dragging on for years.

A European antitrust case against Microsoft eventually resulted in penalties and fines totaling more than $2 billion, but the process lasted about a decade. During that period, a number of competitors complained that they were losing out to Microsoft and warned that the European process was too slow.

The next stage for Mr. Almunia in the case against Google is to assess the latest offer made by the company and then take a final view as to whether it addresses his concerns sufficiently and then invite another, formal submission from the company that would be sent to complainants for review during a period of what is known as market testing.

“We are not at this stage,” said Mr. Colombani, the spokesman, referring to the stage of market testing. “We are in discussions with Google and in the context of these discussions we have just received their proposal.”

In its deal with the F.T.C., Google agreed to make concessions in two areas that coincided with the concerns of European regulators. In one, Google will allow rivals to opt out of allowing the company to “scrape,” or copy, text from their sites. Google was expected to agree to the same terms with European authorities.

But in another area of European concern — whether Google deliberately favors its own products and services in search results — the F.T.C. did not require changes.

The European Consumer Organization, which includes consumer groups from across Europe, called last year for a settlement that would limit Google’s freedom to favor its own services, like maps and shopping sites, in search rankings.

But Google is expected to resist a solution that would tamper with the way it ranks search results that it deems most relevant to consumers. Google also is likely to be wary that any concessions it makes in Europe could lead regulators elsewhere in the world to demand much the same.

Mr. Almunia has also continued to press Google to put fewer restrictions on the way it handles advertisements that are displayed alongside search results when a user types a query in a Web site’s search box. That is another area of Google’s business that was not addressed by the settlement in the United States.

While Google is the dominant search engine in the United States, it holds even greater sway in Europe, accounting for more than 90 percent of searches in a number of major markets. That is one factor giving the Europeans greater leverage in trying to set rules on how Google ranks competing services.

Another factor is European antitrust law, which has long given competitors more protection than U.S. law provides.

Article source: http://www.nytimes.com/2013/02/02/business/global/google-submits-proposals-to-resolve-european-antitrust-concerns.html?partner=rss&emc=rss

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Europe Likely to Be Harder on Google Over Search

January 4, 2013 by Leave a Comment

Few expect the European antitrust watchdog to be as lenient.

The Federal Trade Commission ruled Thursday that Google had not broken antitrust laws, after a 19-month inquiry into how it operates its search engine. But the European Commission, which is pursuing assertions that the company rigs results to favor its own businesses, operates according to a different standard.

The agreement with the American authorities, analysts and competition lawyers say, is unlikely to alter the demands of European regulators, led by the E.U. competition commissioner, Joaquín Almunia.

“We have taken note of the F.T.C. decision, but we don’t see that it has any direct implications for our investigation, for our discussions with Google, which are ongoing,” said Michael Jennings, a spokesman for the European Commission in Brussels.

Faced with nearly $4 billion in possible penalties and restrictions on its business in Europe, Google in July submitted proposals to remedy the concerns of the European Commission, which covered four areas. In its deal with the F.T.C., Google made concessions in two of those areas but was not required to do so in the rest.

A Google spokesman, Al Verney, declined to comment on the content of the company’s proposals to Mr. Almunia but said it would “continue to work cooperatively with the European Commission.”

The Google case underscores a basic difference between the European and U.S. approaches to monopoly power. American antitrust regulators tend to focus on whether a company’s dominance is harmful to consumers; the European system seeks to maintain competitors in the market. Mr. Almunia has vowed to restore competition to the Internet search business in Europe.

“History shows that competition law is applied to monopoly power more stringently in the E.U. than in the U.S.,” said Jacques Lafitte, head of the competition practice at Avisa Partners, a consultancy in Brussels, who brought one of the original complaints against Google. “Whether the E.U. is right or not is a different question.”

Mr. Lafitte has some expertise in the matter. He is the former head of corporate affairs at Microsoft Europe and watched as that company did battle with regulators over its dominant computer operating system. Microsoft won a lenient settlement with the U.S. Justice Department in October 2001, he noted, only to be slapped with nearly €1.6 billion, or $2.1 billion, in E.U. fines and penalties from 2004 to 2008.

Google learned from Microsoft’s mistakes, engaging in discussions with both the U.S. and European authorities to reach a deal rather than fighting a desperate legal action. That approach appears to have paid off: Last month, after a meeting with Eric E. Schmidt, Google’s executive chairman, Mr. Almunia said that the sides had “substantially reduced our differences.”

In its deal with the F.T.C., Google agreed to make concessions in two areas that concern European regulators. In one, it will allow rivals to opt out of allowing Google to “scrape,” or copy, text from their sites. It is probable that Google will offer the same concession to European authorities.

But in a second area of European concern — whether Google deliberately favors its own content in search results — the F.T.C. did not require changes.

Mr. Almunia has also demanded that Google put fewer restrictions on advertising distribution deals, an area that his U.S. counterparts did not explore.

The company will make a detailed set of proposed remedies in January, after which the European Commission will allow the complainants to review them in a period of what is known as “market testing.” Antitrust lawyers say a final denouement could arrive by spring, depending on how hostile Google’s rivals are to the proposed remedies.

FairSearch, an alliance of Google rivals, accused the U.S. trade commission of rushing its decision. It said in a statement that closing the F.T.C. investigation “with only voluntary commitments from Google is disappointing and premature.”

Article source: http://www.nytimes.com/2013/01/05/technology/europe-likely-to-be-harder-on-google-over-search.html?partner=rss&emc=rss

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Europe Fines Electronics Makers $1.92 Billion

December 5, 2012 by Leave a Comment

Senior managers at some of the world’s largest electronics companies often used those meetings, mostly in Asia, to fix the price of picture and display tubes for televisions and computer screens, the top European antitrust regulator said Wednesday.

Joaquín Almunia, the E.U. competition commissioner, said he would levy fines totaling almost €1.5 billion, or $1.96 billion, on seven companies involved in the two cartels, which operated for a decade until 2006. Combined, the fines amount to the largest single penalty for price fixing ever imposed by the commission.

The action follows a spate of similar cases in the glass and display sectors, where bulky cathode ray tubes have been supplanted by technologies like liquid crystal display and plasma that allow manufacturers to build far more compact monitors and screens.

Mr. Almunia imposed the strongest penalties on Philips Electronics of the Netherlands and LG Electronics of South Korea.

Mr. Almunia said at a news conference that the cartel activity began in the late 1990s, when the market was still strong for cathode ray tubes, and lasted until 2006 even as that market declined, allowing the conspirators to continue generating strong returns for a technology that was rapidly becoming outmoded.

“The companies were trying to manage through collusion the decline in the market for these kinds of tubes,” Mr. Almunia said. “The undue profits that the companies derived from the collusion may even have artificially slowed down the transition to the more modern products like LCD and plasma displays.”

Excerpts of minutes from meetings held by the cartel members obtained during the investigation showed the efforts they made to fix the market for the older technologies, according to commission officials.

“Producers need to avoid price competition through controlling their production capacity (of flat types in particular),” one excerpt read. Another noted that “mutual cooperation is required to deal with an expected economic downturn” in the second half of 2002.

One of the “greens meetings” took place at the Palm Garden Golf Club and was followed by a “Top Management” meeting in the Terengganu room of a Marriott Hotel, according to a person with knowledge of the investigation who asked not to be named because of the legal sensitivity of the case.

The person gave no further details about the location or the meeting. But those details suggested that the conspirators played and ate during the day at a luxury golfing resort near the Malaysian capital Kuala Lumpur that is equipped with a driving range, infinity-edge swimming pool and tennis courts.

In addition to the “greens meetings,” there were “glass meetings” for lower-level managers, the name probably related to the glass structure of the cathode ray tubes, officials said. They were held in Asia and in European cities including Glasgow, Paris, Rome, Amsterdam and Budapest, commission officials said.

The cartels “feature all the worst kinds of anti-competitive behavior that are strictly forbidden to companies doing business in Europe,” Mr. Almunia said. There had been “serious harm” to producers in Europe and to consumers, he said, since the cathode ray tubes had accounted for up to 70 percent of the price of screens.

The commission’s antitrust division can fine offenders up to 10 percent of their annual worldwide sales, and the fine on Wednesday exceeded the previous record of almost €1.4 billion, which was imposed in 2008, for a car-glass cartel.

But unlike regulators in the United States, the commission has no criminal enforcement powers and cannot prosecute or seek to jail participants for anti-competitive offenses. Many lawyers say that remains a shortcoming of the European system.

Article source: http://www.nytimes.com/2012/12/06/business/global/europe-fines-7-companies-for-picture-tube-price-fixing.html?partner=rss&emc=rss

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