Dutch website Startpagina.nl claimed victory over Microsoft yesterday when the software giant agreed to pay compensation and make an apology for accusing the site of containing malicious content.

Startpagina.nl was designated a "browser hijacker" in the beta version of Microsoft's free AntiSpyware software, causing the company obvious concern. Neither side has disclosed how much compensation has been paid to account for reputational damage but Microsoft has agreed to keep an acknowledgement of the error on its Dutch site for four weeks.

"The apology is what matters the most to me because, as far as I know, Microsoft has never done that before," said director Bert Wiggers.

Microsoft said that the flagging of Startpagina.nl was due to a technical glitch in the initial AntiSpyware beta that has been fixed in an update. The software did not block users from viewing the Dutch site, but would not allow them to set it as their default home page in Internet Explorer, according to Microsoft.

The row began shortly after Microsoft first launched its AntiSpyware beta in early January. The free program is intended to block malicious programs that secretly snoop on people as they surf the Web. Soon after the software was launched, Startpagina began receiving complaints from a handful of users who said that the new Microsoft program was blocking the site as malicious content and directing them to go to a Microsoft start page, according to Wiggers.

Startpagina.nl is a popular directory site in the Netherlands with around four million daily users and competes with Microsoft's MSN.nl site, Wiggers said.

Startpagina.nl, which is owned by Isle Media, began calling and sending letters to Microsoft to make the US software vendor aware of the problem but received no response, according to Wiggers. After threatening court action, the Dutch company received notice that Microsoft had agreed to settle the dispute. The agreement was finalised on Monday, according to Wiggers.

Microsoft would not reveal the exact terms of the agreement but claimed the glitch was just part of the beta software testing process.