Microsoft (MSFT) could close the door on a 10-year legal battle with the European Union, after the regulator backed its moves to open up internet browsing on Windows to rivals.
The Competition Commissioner Neelie Kroes said yesterday in Brussels that she had "good grounds for thinking that we are moving towards a very satisfactory resolution".
Brad Smith, general counsel for Microsoft, said yesterday's announcement was "a significant step toward closing a decade-long chapter of competition law concerns in Europe".
The regulator became concerned by Microsoft's practice of tying its Internet Explorer web browser to its Windows PC operating system, saying it would not allow consumers a free choice of using competitors, including Mozilla's Firefox and Google (GOOG) Chrome.
"The Commission's position is that PC users should have an effective and unbiased choice between Internet Explorer and competing web browsers to ensure competition on the merits," Ms Kroes said. No fines are expected.
Microsoft had presented remedies to the Commission in July, but they were rejected as inadequate. Following "extensive discussions" with the regulator over the past month, as well as feedback from the industry, it presented improved commitments.
Microsoft plans to allow Windows users in Europe to choose which browser they wish to use, in a commitment that would last five years, having what Ms Kroes called a "direct and immediate impact on the market". The IT group plans to offer Internet Explorer users a choice screen when they set up their new computer, allowing them to install whichever browser they want.
The choice screen will feature the 12 most widely used web browsers running on Windows. "Given that there are about five main browsers on the market today, this approach would leave plenty of room for newcomers to compete," Ms Kroes said.
The Commission is set to market test Microsoft's proposals with consumers this month, but said its preliminary view was: "Microsoft's commitments would indeed address our competition concerns." If accepted, the proposals will be implemented two months from the decision, with Ms Kroes hoping to close the case by the end of the year.
For future versions of Windows, including Windows 7, Microsoft will also not be able to discriminate against PC manufacturers who disable Internet Explorer and install competing web browsers.
The Commissioner was confident that a second strand to its complaints, over opening certain Microsoft brands to third-party firms will also be resolved. Microsoft called the proposals "the single biggest legal commitment in the history of the software industry to promote interoperability".
The new commitments were "essential" for innovation on the web, Ms Kroes said. "Without choice, competition will die, and without competition, innovation will die. This case is not just about competition today, it is about competition and innovation tomorrow, next," she added.
Not everyone was happy with the deal. The European Committee for Interoperable Systems, whose members include IBM (IBM) and Nokia (NOK), said the settlement "does not appear to deal with the inadequacies of Microsoft's standards compliance, unfair pricing practices or other concerns related to patent abuse or standards manipulation".
Fight club: Microsoft's 'previous' with the EU
The legal battle over opening up Windows to rival web browsers is not the first time Microsoft has clashed with the European Commission. The technology giant has been hit with fines worth €1.6bn (£1.5bn) in several previous cases.
In March 2004, watchdogs rapped Microsoft on the knuckles for abusing its dominance and muscling out smaller players especially in the media player market, fining it €497m. Two years later it was fined a further €280.5m.
The original censure was upheld in 2007 by a European Court which rejected Microsoft's appeal. Just months later, the Commission slapped Microsoft with another fine, of €899m, for defying its anti-competitive ruling from 2004.
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