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SPEECH/09/447

Neelie Kroes

European Commissioner for Competition Policy

Power transformers cartel busted; Microsoft web browsers case

Figures and graphics available in PDF and WORD PROCESSED


Opening remarks at press conference

Brussels, 7 th October 2009

Ladies and gentlemen,

I would like to talk to you today concerning a cartel decision that the Commission has just adopted. The cartel concerned power transformers, a vital component in electricity distribution grids.

Between 1999 and 2003, seven large European and Japanese companies which make power transformers had a market-sharing agreement. The European companies agreed not to sell in Japan and the Japanese companies agreed not to sell in Europe. This market sharing cartel meant that companies and public authorities operating electricity distribution grids were denied a competitive choice of transformers, with all that implies for prices. .

The cartel was organised through an oral 'gentlemen's agreement'. These self-appointed 'gentlemen' met in swanky hotels throughout Asia and Europe, from Singapore to Barcelona, Zurich to Tokyo, and Vienna to Lisbon, to carve up the European and Japanese markets between themselves. In an attempt to cover their tracks, the companies were careful to keep the agreement oral. They also took the precaution of using code words for any references to the agreement or its participants in the invitations to the meetings and in the minutes of these meetings. Siemens received immunity for having blown the whistle to the Commission on the cartel.

The total fine of 67.6 million euros is levied against the remaining six members of the cartel. They are:

ABB of Switzerland

Alstom of France

Toshiba of Japan

Fuji of Japan

Areva of France and

Hitachi of Japan.

The last three companies received reduced fines for co-operation with the Commission's investigation. On the other hand, ABB had its fine increased by 50% because it is a repeat offender – the Commission already fined ABB back in October 1998 for taking part in a cartel relating to district heating pipes.

I would like to stress that this latest decision once again confirms the Commission's zero tolerance policy towards cartels. Cartels inflict massive damage on the European economy – even conservative estimates put the figure at billions of euros every year in terms of higher prices and loss of choice for customers and end-consumers.

Cartels have no place in what should be a competitive European marketplace. The Commission has an obligation to millions of honest companies and hundreds of millions of European consumers to tackle the cartel scourge.

Microsoft

And now let me turn to a completely different case, where I have good grounds for thinking that 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.

I am pleased to announce that the Commission will formally market test proposals made by Microsoft to address the Commission's concerns regarding the tying of Internet Explorer to the Windows PC operating system.

As you may recall, 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. This choice is also essential to allow consumers to benefit from technical development and innovation both on the web browser market and on related markets, such as web-based applications.

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 month and next year.

The Commission's preliminary view is that Microsoft's commitments would indeed address our competition concerns.

Microsoft's proposal in particular recognises the principle that consumers should be given a free and effective choice of web browser. It would empower all current and future users of Windows in Europe to choose which browser they wished to use. It would therefore have a direct and immediate impact on the market. The commitment would remain in place for five years.

In July, Microsoft had proposed a consumer choice screen to address the Commission's concerns that Microsoft's tying of Internet Explorer to Windows undermined product innovation and ultimately reduced consumer choice. Over the summer, we informally market tested this proposal. On the basis of the comments received, we asked Microsoft to improve the choice screen and Microsoft has done that.

Microsoft's proposal means that users who have Internet Explorer as their default browser would be shown a choice screen - like the one you see behind me. On this screen, users could choose which web browser they would like to install on their computer. It could be one or several – the choice would be with the user.

The choice screen would feature the 12 most widely-used web browsers that run on Windows. Membership of this list would be based on browsers' share of usage in the European Economic Area. Given that there are about five main browsers on the market today, this approach would leave plenty of room for newcomers to compete.

The important point is that the user would have a meaningful choice between Internet Explorer and its competitors.

In addition, in future versions of Windows, including Windows 7, PC manufacturers would be able to install competing web browsers, set those as default and disable Internet Explorer. Microsoft would not be allowed to discriminate against PC manufacturers who decided against Internet Explorer. It would also be prohibited from circumventing free and effective browser choice by other means.

What has changed since July?

The changes that Microsoft has made to its proposal since July are designed to improve still further to the ability of consumers to make a free and fully informed choice of web browser. Microsoft has in particular agreed to present users with a first screen explaining what web browsers are. "Tell me more" buttons for each browser would also enable users to learn more about the web browser they may wish to install. The user experience would be better and the choice screen would better represent competing browser vendors. Finally, the proposed commitment would now be subject to a clause allowing the Commission to review it in the future to ensure that consumers would continue to have a genuine choice among browsers.

With these improvements, I believe that the proposal is ready for formal market testing. On Friday we will therefore publish a notice in the Official Journal asking for comments on Microsoft's commitments. A copy of this notice will be available on the Commission's website today. If accepted, the choice screen would be distributed to users within two months from our decision.

Before we proceed to questions, let me also say a few words on interoperability. As you may recall, in July Microsoft also made proposals about disclosures of interoperability information. These proposals would improve interoperability between third party products and several Microsoft products. These products include Windows, Windows Server, Office, Exchange, and SharePoint. Microsoft has improved these proposals as well, as you will be able to see on its website very soon.

I welcome this initiative. Even though it remains informal vis-à-vis the Commission, it would include warranties that Microsoft would offer to third parties and that could be privately enforced.

I look forward to taking your questions.


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