Under the agreement, the company is setting up an Antitrust Compliance Office, which will report to the Microsoft board.

Share story

Microsoft has settled a lawsuit stemming from a costly violation of its agreement with European Union antitrust regulators to offer consumers the option of using other companies’ Web browsers.

A federal judge in Seattle this week gave preliminary approval to a settlement between Microsoft shareholders and the company that will create an office responsible for monitoring the company’s compliance with antitrust regulations.

Microsoft will establish an Antitrust Compliance Office to oversee compliance with any EU or U.S. antitrust matters, and dedicate up to $42.5 million over a five-year period to funding the effort. The office will report to Microsoft’s board.

The company also has agreed to spend $7.3 million to pay the shareholders’ lawyers who negotiated the settlement.

The settlement stems from Microsoft’s breach of a deal it made with EU regulators in 2009.

The EU had investigated Microsoft for including its Internet Explorer Web browser — and no rival ones — with copies of its Windows operating system. Similar bundling on the dominant personal-computer operating system was the root of more than a decade of antitrust scrutiny in the U.S.

Microsoft resolved the issue by agreeing with EU regulators to offer Windows users a choice of browsers for five years

But what Microsoft called a technical error caused more than 15 million copies of Windows 7 to ship to EU member states without that browser-choice tool. The EU ultimately fined Microsoft about $732 million for violating the agreement.

Two Microsoft shareholders, Kim Barovic and Stephen DiPhilipo, subsequently went to the board with concerns about the corporate-governance lapses that led to the error.

When they were rebuffed, they jointly sued the company, former Chief Executive Steve Ballmer, ex-Chairman Bill Gates and other board members at the time of the error. The suit, filed in Seattle federal court, said the defendants breached their duty to shareholders and failed to properly oversee the company.

Microsoft fought the suit but ultimately agreed to enter settlement talks last summer.

On Wednesday, a Microsoft spokesman said the company in 2013 committed to steps to prevent future errors and would continue those efforts. “We’re pleased to settle this matter by adding new resources and processes to the work already under way,” he said.

An attorney representing the shareholders declined to comment.

As part of the deal U.S. District Judge John Coughenour blessed Tuesday, Microsoft will notify shareholders of the proposed settlement and seek their comments before a Jan. 5 hearing in Seattle.