Europe's antitrust chief Joaquin Almunia fined Microsoft €561 million (£484 million) for failing to include a browser choice page in its upgrade to Windows 7 in 2011.
The browser choice screen was set as a requirement by the European Commission following an anti-competitive ruling against Microsoft in 2009.
Despite Microsoft saying the omission was an oversight due to a "technical fault," Competition Commissioner Almunia charged the company for failing to live up to the terms of the 2009 settlement.
Almunia could have imposed a fine of up to 10% of Microsoft's global annual revenue - around $7 billion. But he said that the final figure was calculated based on the length of time of the infringement.
The Commission has increasingly used settlements to solve antitrust cases rather than punitive fines. But this is the first time it has fined a company for failing to honor commitments.
Almunia seems keen to send the message that settlements must be followed to the letter. This is something Google will be keeping an eye on as it tries to settle its own antitrust case with the Commission. Failure to live up to commitments is very serious "whether intentional or not," Almunia said.
The fact that Microsoft cooperated with the Commission as soon as the omission was noticed was a mitigating factor, he said.
Microsoft agreed to include the browser choice screen after it was found to have breached European Union competition laws by bundling its Internet Explorer browser with the Windows OS. However following the upgrade in 2011, the browser option page disappeared.
It was not until July 2012 that it was restored after authorities contacted the company. Rival browser developer Mozilla estimated that the omission of the browser choice screen cost them around 8.8 million downloads of Firefox.
Almunia could have imposed a fine of up to 10% of Microsoft's global annual revenue.