A faulty Windows 7 update that rolled out in Europe two years ago just cost Microsoft a whopping $731 million – a fine imposed on the software giant by the European Commission (the European Union’s anti-trust authority), following an anti-trust investigation for violating an agreement made in 2009.
Four years ago, Microsoft agreed to give Windows users in Europe the freedom to choose what browsers they wanted to download and install on their computers by redirecting them to browserchoice.eu when they boot up their systems for the first time. The website, which is hosted by Microsoft, contains download links to several browsers: Chrome, Firefox, Maxthon, Opera, and Microsoft’s own Internet Explorer. When the company released a Windows 7 Service Pack 1 update in 2011, however, the pop-up dialog box that points users to the aforementioned website disappeared.
Microsoft’s agreement with the European Commission was supposed to be in place until 2014. But even though Microsoft was under an antitrust investigation, it claimed in its December 2011 annual report that the dialog box was still very much in place. Microsoft blamed a technical error for the issue and was supposedly unaware of it until the Commission brought it to its attention in July 2012. The company has since apologized and issued a statement: “We provided the Commission with a complete and candid assessment of the situation, and we have taken steps to strengthen our software development and other processes to help avoid this mistake – or anything similar – in the future.”
Microsoft has also cut Steve Ballmer’s bonus to $620,000 – less than half of the maximum $1.4 million bonus he can get – in part due to this issue, but also due to the company’s sluggish online businesses and the less-than-stellar performance of the Windows Phone OS. This is not the first time Microsoft was fined such a large amount. In 2004, it was fined roughly $647 million for hindering growth of its rivals’ server and media programs. A fine worth $365 million was also imposed on the company in 2006 for refusing to supply information to rivals on fair terms – in 2008, it was fined $1.2 billion for the same reason.
It is unclear whether the company will appeal the ruling, but it’s reportedly hoping that the fine would end up being lower than $731 million, which is 1 percent of its 2012 total revenue. That, however, might require good luck on Microsoft’s part. Speaking to the Associated Press, EC’s top competition regular Joaquin Almunia said the commission could have fined Microsoft up to 10 percent of its annual revenue. In addition to that, the commission is looking to make an example out of Microsoft so other companies don’t follow suit.
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