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Filter - Cynthia L. Webb
Microsoft Unbuttons Its Lawsuits


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By Cynthia L. Webb Staff Writer
Thursday, July 1, 2004; 9:45 AM

Six years and millions of dollars later, Microsoft's legal status in the United States appears to be settled.

Following agreements to resolve antitrust-related class action lawsuits with Arizona, Massachusetts and North Dakota, the company was handed a major victory when a federal appeals court upheld the company's 2001 antitrust settlement with the Justice Department.

The decision had the effect of "soundly rejecting arguments by Massachusetts and competitors that the landmark pact didn't effectively curb Microsoft's monopoly power. The ruling effectively ends a six-year legal saga, prompted by Microsoft's actions to quash the threat of competition from Internet-based software. Microsoft agreed to relatively minor modifications of its business practices to end the case, which at one time had prompted calls from the Justice Department and a federal judge to break up the software giant," The Wall Street Journal reported. "Significantly, the U.S. Circuit Court of Appeals for the District of Columbia agreed with a lower court and Microsoft that forcing the company to remove its browser software from the Windows operating system would hurt the performance of Windows, and effectively hurt consumers. The settlement permits computer makers to hide Microsoft's built-in Web browser software, rather than remove it altogether."

The Associated Press called the decision "a significant milestone in the long-running antitrust dispute, which began in the early 1990s. Any court-ordered changes to the design of Microsoft's lucrative Windows software would have reverberated across homes, industries and governments since its products run more than 95 percent of the world's personal computers."
The Wall Street Journal: Microsoft Wins Approval of Pact In Antitrust Case (Subscription required)
Associated Press via The Washington Post: Court OKs Microsoft Antitrust Settlement (Registration required)
Court of Appeals ruling (PDF)

The San Jose Mercury News said the decision "removes much of the legal uncertainty over Microsoft's business, at least in the United States. The company still faces years of litigation in Europe, where the European Commission has found Microsoft in violation of antitrust laws." The Washington Post explained the Justice Department probably would not ask the Supreme Court to consider the case. That, according to the Post, "effectively closes the antitrust case brought in 1998 by the Justice Department, more than 20 states and the District. Ten states signed on to the 2001 settlement while nine plus the District pushed for stiffer sanctions in new hearings. When U.S. District Judge Colleen Kollar-Kotelly ruled against them in November 2002, only Massachusetts appealed, continuing to argue that the sanctions included in the settlement were a slap on the wrist and that the judge had erred in approving them."
San Jose Mercury News: Epic Case Ends After Six Years (Registration required)
The Washington Post: Microsoft Settlement Upheld (Registration required)

Reuters noted that the decision "rejected appeals for tougher remedies" and "turned down appeals from the state of Massachusetts and two high-tech industry groups that could have led to a redesign of the company's Windows operating system."

Cheers and Tears

Microsoft and the feds couldn't be happier: "Today's unanimous decision sends a clear and emphatic message that the settlement reached two years ago is a fair and appropriate resolution of these issues," said Brad Smith, general counsel at Microsoft, in a statement. And Assistant Attorney General R. Hewitt Pate, head of the Justice Department's antitrust division, called the ruling "a resounding victory for the Justice Department and American consumer," according to the Associated Press and other media outlets.

Massachusetts was not thrilled. "This decision is bad news for consumers, bad news for competition, and ultimately will be bad news for our economy," said state Attorney General Tom Reilly, according to the Financial Times. "This clearly shows that our antitrust laws are not effective in protecting consumers. Our high-tech economy will not reach its full potential unless regulators and the courts are willing to deal with Microsoft and its predatory practices." The Washington Post quoted Reilly as saying that Microsoft "not only has been ruled a monopolist, they are now a protected monopolist. That's a very dangerous thing."

And more gloom and doom from the Computer and Communications Industry Association, one of the two trade groups that challenged the settlement. "We're disappointed, obviously," said Ed Black, president and chief executive officer of the CCIA, according to Reuters. "The settlement remains a failure and it has not served the public interest." Meanwhile, Mitchell Pettit, head of trade group ProComp, told the Post the ruling "comes close to blessing Microsoft as a natural monopoly."
Reuters: Appeals Court Upholds Microsoft Antitrust Deal
Financial Times: Microsoft In Appeals Court Victory

Found: A New Search Strategy

With a key legal victory in its pocket, Microsoft can compete head-on with search engine rivals Yahoo and Google. The company has announced a number of changes to its online search tool, including changing the way it labels paid ads from the main section of returned searches and a new look for its search site.

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