Microsoft EU Fines: Will More American Companies Fall Victim to Foreign Regulators?


Microsoft Corporation (MSFT.) was fined 561 million euros ($731 million) by European Union regulators for violating terms of a settlement regarding the presence of Internet Explorer. After a settlement in 2009 between the European Commission and Microsoft, the software firm agreed to develop software that offers its users a host of choices for a default browser alongside Internet Explorer, such as Google Chrome, Apple’s Safari, and Mozilla Firefox. The most recent fine resulted from a discovery that 10% of computers running Microsoft in the EU, or 28 million users, did not have the browser choice software.

Microsoft’s case history in Europe is indicative of a growing reality. The EU will continue assert to its power in anti-trust litigation, signaling to its American counterparts that winning anti-trust suits in the United States no longer means that a corporation is safe from foreign interference.

Starting with a 1993 complaint by Utah-based Software Company Novell over Microsoft’s licensing practices (specifically regarding Windows Media Player), the EU has consistently pursued Microsoft through anti-trust regulation. The EU has imposed 2.24 billion euros' ($2.91 billion) worth of fines on Microsoft over the last decade, including an 899 million Euro ($1.17 billion) penalty for violating a 2004 order to share information with its rivals.

Interestingly enough, the U.S Department of Justice (DOJ), which pursued Microsoft with anti-trust litigation in 2001, applauded the EU’s initial ruling against Microsoft in 2009. Christine Varney, Assistant Attorney General in the DOJ’s antitrust division, stated, "As we understand it, the settlement is based on measures to enhance competition and is designed to preserve industry participants' incentives and ability to compete going forward. A settlement that helps to clarify obligations under European law allows the industry to move forward."

Likewise, the EU can be an additional playing ground when the federal government cannot move forward with anti-trust actions in American courts.

Microsoft is not the only company to fall victim to EU jurisprudence. The planned merger between General Electric and Honeywell in 2001 was blocked in the EU after being approved by the DOJ. This was the first time officials outside the United States stopped a merger between two American corporations. In contrast to the Microsoft case, the DOJ was not as receptive to the EU’s intervention. Deborah Platt Majoras, Deputy Assistant Attorney General, said of the EU’s decision, "Our strong belief in markets and our humility in our own predictive abilities lead us to be skeptical of claims by rivals that a merger will lead to their ultimate demise and to demand strong empirical proof before we will accept such claims."

Predictably, EU regulators can also be the bane of the DOJ’s existence, since they are usurping the DOJ’s authority in the global marketplace.

The EU will continue to play a large role in setting the rules of the international marketplace. It is also pursuing Facebook and Google regarding the use and distribution of private data in the EU.

Whether the DOJ or private American corporations agree to regulations by the EU is irrelevant. The threat of being denied access to a free trade area of over 500 million citizens is all the leverage the EU needs to assert regulatory dominance over the tech industry.