Microsoft and the EU: Set to Kiss and Make Up?

European Union Competition Commissioner Neelie Kroes
European Union Competition Commissioner Neelie Kroes

Microsoft (s msft) is closing in on sealing a far-reaching agreement with the European Commission that would end an antitrust battle that’s been simmering for more than 10 years. “We believe this is an answer,” European Union Competition Commissioner Neelie Kroes, who has taken a hard line with Microsoft on high-profile issues such as distribution practices for its Internet Explorer browser, said in reference to the latest settlement offer from Microsoft. If the offer is officially approved — it will be distributed to several third parties for comments on Friday — it will have a significant impact on both the browser market and how Microsoft disseminates information on the inner workings of  Windows and its Office suite of productivity applications. It could also have a big impact on Microsoft’s Windows 7 OS, due Oct. 22nd.

Microsoft has released a statement in which its general counsel, Brad Smith, expressed relief over the organization’s newfound friendly stance. In it, he says:

“We welcome today’s announcement by the European Commission to move forward with formal market testing of Microsoft’s proposal relating to web browser choice in Europe. We also welcome the opportunity to take the next step in the process regarding our proposal to promote interoperability with a broad range of our products.”

The proposal, which would see Microsoft incorporate a ballot screen inside the Windows OS that lists a broad array of browsers and allows users to choose which one to use, has been on the table for months now. Opponents, among them Mozilla and Opera, have criticized the fact that the ballot screen is found within Internet Explorer, which is still bundled with Windows, and the fact that any alternative browser must be downloaded, which many users will be too lazy to do.

Internet Explorer has been steadily losing market share to Mozilla’s Firefox in particular, and currently sits at a new low of 65.7 percent, according to Net Applications, while Firefox has grown to 23.8 percent. The open source Firefox browser is more popular in Europe, where general friendliness toward open source software is greater, than it is in the U.S. While Mozilla has opposed Microsoft’s implementation of a browser ballot screen, the inclusion of one still stands to increase Firefox’s adoption in Europe.

The settlement offer that Microsoft has extended to the European Commission also covers what Brad Smith calls “a public undertaking that covers interoperability with Microsoft’s products — the way our high share products work with products from our competitors.” Smith specifically names Windows, Windows Server, Office, Exchange and SharePoint as product lines that will become more interoperable with competitive software. In addition, his statement discusses the open source software community specifically: “Microsoft’s proposed undertaking will ensure that developers throughout the industry, including in the open source community, will have access to technical documentation to assist them in building products that work well with Microsoft products.”

Ever since its far-reaching agreement with the U.S. Department of Justice in the 1990s, Microsoft has both relaxed some of its competitive practices and found loopholes through which many competitors still feel the company behaves in an anti-competitive fashion. What looks to be a significant new deal between Microsoft and Europe is likely to have the same effect, with concessions leading to some market share gains for the software competition, but not total reform from Microsoft.

The move may also signify a realization from the European Commission that deliberating for years on end on important software issues can actually do a disservice to technology adoption, innovation and business. On that front, Neelie Kroes and the commission have been widely criticized for imposing a months-long delay in Oracle’s (s orcl) proposed acquisition of Sun Microsystems (s java).  Critics argue that Sun’s MySQL database business is losing customers to IBM (s ibm) and other competitors in the meantime. At a certain point, the European Commission had to come to a decision regarding its stance toward Microsoft, and it looks like that time is now.