In a ringing victory for Microsoft Corp, a federal judge on Friday approved the company’s antitrust settlement with the U.S. Justice Department, likely ending a legal saga that has dragged on since 1998.
The decision was a stinging rebuff to nine states and the District of Columbia, which said the agreement needed more teeth to keep the software giant from using its power to harm competitors and consumers.
But U.S. District Judge Colleen Kollar-Kotelly rejected most of the states’ demands for stronger sanctions, saying they failed to make their case. The states “present little, if any, legitimate justification for these remedies, and in most instances these proposals are not supported by any economic analysis,” she said.
The judge’s ruling buoyed investors, who bid up Microsoft’s stock $3.33, or 6.3 percent, to $56.33 in after-hours trading. It also was hailed by the Justice Department as good news for consumers.
“Today, consumers all across America won a great victory,” said U.S. Atty. Gen. John Ashcroft at a press conference.
Among the additional remedies the judge rejected was a proposal that Microsoft be forced to make available to computer manufacturers a stripped-down version of its pervasive Windows operating system that runs most of the world’s personal computers.
The states argued that would keep Microsoft from integrating popular computer programs into its operating system. The states had contended that Microsoft had long used that tactic to undermine competing companies with similar software.
Friday’s ruling “represents a fair resolution of this case,” said Microsoft Chairman Bill Gates. “This settlement puts new responsibilities on Microsoft, and we accept them.
“We recognize that we will be closely scrutinized by the government and our competitors,” he added. “I am personally committed to full compliance. We have already made many of the necessary changes.”
Many legal experts viewed the case as perhaps the most important antitrust case in decades. It raised questions about the relevance of early 20th Century antitrust laws, enacted during the now seemingly quaint era of oil and steel barons, to a more fluid, high-technology age.
For years, the case had cast a cloud over the direction of the technology industry, and its resolution carried for many a sense of relief.
lllinois was among nine states that joined the Justice Department in settling with Microsoft. Kentucky, Louisiana, Maryland, Michigan, New York, North Carolina and Wisconsin also joined the Justice Department settlement.
On the losing end were California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia.
Small satisfaction
Attorneys general from some of those states gamely tried to spin Friday’s court opinion as a partial victory for their side, despite the view of legal experts that they were largely routed.
“Obviously there are number of things we proposed that weren’t in the [judge’s] opinion,” said Tom Miller, the Iowa attorney general. “We’ve been in litigation long enough to know that you get some things, other things you don’t.”
But he said the state attorneys general were pleased that the judge closed a few loopholes and strengthened some language.
For instance, he said, an earlier version of the settlement said that Microsoft was banned from retaliating against other companies that failed to accede to its wishes. The final settlement was stronger, stating that Microsoft was prohibited from even making threats.
Legal experts, however, indicated that the states that had refused to settle had taken a drubbing at the hands of Microsoft.
“This clearly is a lopsided victory for Microsoft and the settling parties,” said Hilliard Sterling, a technology and antitrust expert at Much, Shelist, Freed, Denenberg, Ament & Rubenstein, a Chicago law firm.
“This is virtual rubber stamp of the proposed decree. It has minor changes, but nothing that will cause Microsoft to alter its business conduct,” Sterling said. “This is probably beyond its wildest expectations. This is a galaxy away from the breakup ordered” not so long ago, he said.
Sterling was referring to the ruling of U.S. District Judge Thomas Penfield Jackson in June 2000. That order was overturned by a federal appeals court in June 2001, but that court upheld Jackson’s finding that Microsoft had violated the nation’s antitrust laws.
The appeals court concluded that Microsoft had used its power as a monopoly in the computer industry to force companies like America Online, which provide consumers with Internet access, to sign exclusive contracts with the giant softwaremaker.
The contracts limited those companies from readily providing most of their customers with alternatives to Microsoft’s Internet browser.
The appeals court also found Microsoft guilty of using its monopoly powerto intimidate Intel Corp., the huge maker of computer-processor chips, from developing software that was a potential threat to the continued dominance of Microsoft’s Windows operating system.
Settlement questioned
“The Bush administration handed Microsoft an amazing victory,” said Robert Lande, a professor who specializes in antitrust law at the University of Baltimore law school. Lande faulted the administration for negotiating what he believed was a weak settlement.
“It’s as if the appeals court gave consumers a dollar, and the Bush administration negotiated away 90 cents of that dollar, and the states were trying to get some of that 90 cents back.”
Lande said it would have taken backbone for the judge to make the settlement significantly stronger in defiance of the Justice Department, especially since she has no expertise the area herself.
“She didn’t have the guts to do it,” he said. “She did the easy thing; she just went along with the Department of Justice.”
Besides the ban on threats of retaliation, the settlement requires Microsoft to have a panel of independent directors from its corporate board act as a technical compliance committee.
The panel will be responsible for assuring that Microsoft discloses enough technical information about its software to other companies in the industry to allow those companies to write software that works with Windows.
In the past, Microsoft withheld such details, creating problems for its competitors
