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Appeals court OKs Microsoft antitrust pact

U.S. appeals court approves landmark antitrust settlement Microsoft negotiated with Justice Department, setting aside objections by Massachusetts that the sanctions were inadequate.
/ Source: The Associated Press

A U.S. appeals court on Wednesday unanimously approved the landmark antitrust settlement Microsoft Corp. negotiated with the Justice Department, setting aside objections by Massachusetts that sanctions were inadequate against the world’s largest software company.

In a significant victory for Microsoft and the Justice Department, the appeals court ruled 6-0 that the settlement was “in its entirety” in the public’s interest. (MSNBC is a Microsoft-NBC joint venture.)

In exuberant language, the U.S. Circuit Court of Appeals for the District of Columbia applauded provisions of the complex settlement that permit computer makers to hide Microsoft’s built-in Web browser software so that consumers can more seamlessly use software from Microsoft’s rivals.

“We say, Well done!” the court wrote.

Microsoft’s top lawyer, Brad Smith, described the decision as a “clear and emphatic message” that its settlement with the Bush administration was proper.

The appeals court said an alternative proposal from Massachusetts to require Microsoft to remove parts of its software from the dominant Windows operating system could hurt consumers by leading to a confusing world with different versions of Windows.

“Letting a thousand flowers bloom is usually a good idea, but here the court found evidence ... that such drastic fragmentation would likely harm consumers,” the court wrote.

The court also rebuffed a plan by Massachusetts to require Microsoft to reveal the secret blueprints for its Web browser, saying such a move might help the company’s rivals but not help competition flourish.

Massachusetts’ attorney general, Tom Reilly, called the decision “bad news for consumers, bad news for competition and ultimately bad news for our economy.”

“This clearly shows that our antitrust laws are not effective in protecting consumers,” Reilly said in a statement. “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 decision is a significant milestone in the long-running antitrust case. 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 ruling followed a March 24 decision by European antitrust regulators, who concluded that Microsoft unfairly hurt rivals by building its multimedia software into Windows.

The European Commission fined Microsoft a record $613 million, but it agreed earlier this month to temporarily suspend its decision pending a ruling on whether sanctions should be delayed while Microsoft appeals.

The central question for the appeals court involved how much deference judges should show toward the settlement negotiated by the Bush administration and Microsoft lawyers.

That agreement, approved in November 2002 by U.S. District Judge Colleen Kollar-Kotelly, was aimed at giving consumers more choices by, among other things, helping rivals develop competing software on computers running Windows. The provisions expire in 2007.

Massachusetts, the only holdout state that continued to press for tougher sanctions, argued that the settlement was so flawed that it represented an abuse of the trial judge’s discretion.

Microsoft’s lawyers responded that Massachusetts had sought extreme penalties that would require its engineers to redesign Windows, “almost certainly an impossible task.” It argued that the court-approved settlement was appropriate for its dozen violations of U.S. antitrust laws.

The appeals court in Washington has proved a largely favorable venue for Microsoft. The court removed two other trial judges from the case, in 1995 and 2001, who had ruled against the company, Stanley Sporkin and Thomas Penfield Jackson. It also overturned a Jackson contempt ruling against Microsoft, and blocked Jackson’s plans to break the company apart.

The same appeals court unanimously agreed with Jackson’s ruling that Microsoft had illegally abused its monopoly over Windows operating system software, and it instructed Kollar-Kotelly to impose new sanctions. Within months — and soon after the Sept. 11, 2001, terror attacks — the sides instead negotiated the disputed settlement.