A federal judge Friday approved the terms of an antitrust settlement intended to rein in Microsoft’s predatory monopoly and restore competition to the software marketplace. The move ends months of speculation as to whether the court would toss the settlement in favor of imposing stricter penalties on Microsoft as pushed for by nine states that split from the coalition of 18 states that brought the original case.
IN THE END the decision by U.S. District Judge Colleen Kollar-Kotelly was, to pull a phrase from her opinion in which she quotes Shakespeare, “much ado about nothing.” Kollar-Kotelly approved the settlement terms making only sight technical adjustments.
“The court is satisfied that the parties have reached a settlement which comports with the public interest,” Kollar-Kotelly said in her opinion. However, she did issue a kind of backhanded warning to Microsoft saying that because the company “has a tendency to minimize the effects of its illegal conduct” she will monitor it closely and not waste time bringing the full weight of the court against it should she find the company in violation of the settlement terms. (MSNBC is a Microsoft - NBC joint venture.)
Kollar-Kotelly put Microsoft’s top officials on the spot, saying she would hold them directly responsible “for implementing each provision of this remedial decree.”
At times Kollar-Kotelly pulled from the classics in writing her decision. “Let it not be said of Microsoft that ‘a prince never lacks legitimate reasons to break his promise,’” she wrote, quoting Niccolo Machiavelli’s classic “The Prince.”
And in explaining away the controversy surrounding the settlement language that says Microsoft will have the “sole discretion” to decide what software code comprises a Windows Operating system product,” Kollar-Kotelly wrote: “This controversy, to quote the Immortal Bard, is really ‘much ado about nothing.’”
The controversy stemmed from the fact that some believe the definition gives Microsoft “a form of absolution” from “any liability for the illegal tying of two distinct products based on the design of its Windows operation system product,” Kollar-Kotelly wrote. “Such criticism is misplaced,” she said in her opinion.”
COMPLETE VICTORY
The decision was a complete victory for the Justice Department and the nine states that signed onto the settlement terms.
“Consumers all across America won a great victory,” with the approval of the settlement, said U.S. Attorney General John Ashcroft. The settlement “provides certainty and stability to a vital sector of America’s economy,” Ashcroft said.
Kollar-Kotelly was effusive in her support for the settlement as she commended the “intense efforts” of negotiating parties. She praised the settlement for its “clear, consistent, and coherent manner in which it accomplishes its task” and noted that “the provisions form a tightly woven fabric” of accountability and enforcement.
Microsoft founder Bill Gates, barely able to contain a huge grin, said the settlement “is a tough but fair compromise” that will “enable us to continue to innovate.” Gates acknowledged that the company “will be closely scrutinized by our competitors and the government.”
And in fact, Microsoft has already been implementing many provisions of the settlement, even before it was mandated to do so. For example, the company has already put in place a unified pricing structure for Windows so as not to discriminate against certain resellers. And the company has been complying with terms set forth that require it to share technical data and releasing an update to Windows XP that permits the removal of Microsoft icons from the desktop.
NOT SO FAST
If the ruling Friday was an overwhelming victory for the Justice Department is was equally a complete defeat for the nine non-settling states, led by California, Iowa and Connecticut.
Although Kollar-Kotelly allowed the non-settling states a complete hearing before her bench in which they presented evidence and pleaded that harsher penalties need be imposed on Microsoft, in the end she wholesale dismissed their case.
The judge said that the non-settling states trial strategy of bringing “all existing allegations of anticompetitive conduct - which have not been proven or for which liability has not been ascribed” - was the wrong way to approach the case.
“This court has had little choice but to reject (those states’) remedial suggestions on the grounds that they are unjustifiably in conflict with the imposition as well as the rejection of liability in this case.”
Critics of the judge’s ruling wasted no time in airing their disagreement.
“I think the real tragedy is that after six months the opinions don’t reflect any grappling with some pretty serious issues,” said Glenn Manishin, an antitrust attorney with Kelly, Drye & Warren. The judge’s written opinion, which goes on for some 300-plus pages, “reflects a lack of analysis and a lack of thought and a lack of serious grappling,” Manishin said. “I don’t like to use the word lazy, but it’s inexplicable to me why it took [so long] for these opinions to come out given the dearth of serious analysis in them.”
Kollar-Kotelly’s decision to accept the settlement “does nothing to restore competition to the marketplace or to prevent Microsoft from repeating acts explicitly held by the Court of Appeals to have been illegal,” said former appellate judge Robert Bork. “The net result is that until this decision is overturned on appeal, as I believe it will be, competition will not be restored.”
It remains a question as to whether Kollar-Kotelly will allow other parties to intervene and appeal her decision to approve the settlement.
The non-settling states haven’t yet decided whether to appeal Kollar-Kotelly’s decision. “In terms of any kind of appeal, we’re still digesting the case, that decision is made collegially among the whole group so no decision has been made about that,” said Iowa Attorney General Tom Miller.
FIVE YEARS AND OUT… MAYBE
Microsoft will be under the terms of the settlement for only five years; that’s much less then the typical antitrust settlement. However, the judge reserved the right to extend that time period and in the process left no doubt that her fingerprints will be all over the case for years to come.
“The court considers it imperative, in this unusually complex case, for the court’s retention of jurisdiction to be clearly articulated and broadly drawn,” she wrote.
The settlement is supposed to prevent Microsoft from using its monopoly power to thwart nascent technologies, such as it did in the browser market when the company used “every trick in the monopolist’s handbook” to crush the browser of chief rival Netscape, as Judge Thomas Penfield Jackson, the initial trial judge, wrote in his opinion that found the company guilty of violating antitrust laws.
Microsoft also must refrain from making exclusive deals that hurt competitors. At one time Microsoft offered Internet companies incentives to advertise its own Internet Explorer Web browser while ignoring Netscape Navigator.
In the settlement Microsoft also must have a uniform pricing scheme for computer makers, though it is still allowed to provide for volume discounts. Further, those prices will be public; in the past they were secret, allowing the company to discriminate against those companies that provided rival software to be loaded on new computers.
Microsoft also must allow computer maker and customers to remove the desktop icons for some of Microsoft’s built in technologies and the company also is being made to share more of the inner workings of the Windows operating system and to share that data earlier and on a more frequent basis.