Microsoft may be nearing EU truce

The European Union said Tuesday that it liked Microsoft's proposal to let computer users choose their own Internet browser, and Microsoft exhaled.

"I have good grounds for thinking that we are moving towards a very satisfactory resolution of some serious competition problems in the computer software sector, and more particularly Web browsers and interoperability information," European Commissioner for Competition Neelie Kroes said at a news conference Wednesday.

The European Commission, the EU's administrative arm, will begin formal testing of the screen now and likely issue a final decision before the end of the year, when Kroes' term ends.

Brad Smith, Microsoft general counsel, hoped her comments signaled a "newer and stronger relationship" with Europe. The EU has not hesitated to slap major penalties on Microsoft for leveraging its dominance with Windows to build up the market for other Microsoft software.

In 2008, the commission fined Microsoft 899 million euros, $1.4 billion, for failing to comply with an earlier antitrust ruling. The commission has been investigating Microsoft for monopoly practices with Internet Explorer, its Web browser, since developer Opera filed a complaint in December 2007.

"Today was a very big step in our ability to close a very long chapter," Smith said. "It plays a significant role for Microsoft at three levels: Getting this clarity allows our teams to do what they do best, which is develop software. It removes controversy, which is something we've had to manage in Europe. It creates a level legal playing field for the whole industry."

Under the proposal, Microsoft will offer a browser ballot screen to Windows XP, Vista and 7 users in Europe that have set Microsoft's Internet Explorer as the preferred browser. The ballot will give users the option to choose different preferred browsers from 12 developers.

In an earlier proposal in July, Microsoft put Internet Explorer at the top of the screen. That has now been changed so that the choices are in alphabetical order. Microsoft also has since added an introductory screen and "tell me more" button to the browser proposal. In addition to the browser ballot screen, Microsoft will give PC makers worldwide the ability to install another default browser or to turn off Internet Explorer in computers it ships.

Microsoft also addressed interoperability issues in a 10-year agreement, offering to sell a warranty to developers so their software will work with Windows, Server, Office and Sharepoint.

Since July, the company hammered out the proposal with the European Commission in 20 videoconference meetings that began as early as 6 a.m. in Redmond, Smith said. The morning call set the Microsoft's legal-team agenda for the day, which ended with e-mails to the commission in Brussels. The commission then worked on it through its day in Europe and turned it around for the attorneys in Redmond to wake up to.

Competitors said Wednesday they wanted to take a closer look at the proposal. The European Committee for Interoperable Systems, which includes competitors such as IBM and Oracle, issued a statement saying it would "analyse the commitments to verify their ability to ensure that Microsoft respects both the letter and the spirit of the settlement."

Opera, the browser developer that first filed the complaint against Microsoft, said in a statement that Tuesday's "proposal will not effectively remedy the abuse. But it can be made effective with modest changes."

Luke Froeb, an associate professor of management at the Vanderbilt Business School, said while Europe is more aggressive about antitrust cases, the relief the commission prescribes "is really problematic." Froeb is a former economist at the Federal Trade Commission.

"Things change so quickly that you're litigating a case that might be a year, two, three years old, and nobody cares about it now because we're on to completely new and different issues," Froeb said.

The landscape has changed significantly for the industry. Internet Explorer has already lost significant share to Mozilla's Firefox browser. Many, including Microsoft, have raised concerns about Google's monopoly in online search, and regulators in the U.S. and in Europe are examining a proposed Oracle-Sun merger and the Microsoft-Yahoo partnership.

Sharon Pian Chan: 206-464-2958 or schan@seattletimes.com