US Appeals Court upholds Microsoft settlement

1 July 2004 The US Appeals Court has upheld Microsoft’s two-year-old anti-monopoly settlement with the Department of Justice.


The Court’s 83-page ruling published this week preserves the settlement and dismisses the objections made by the state of Massachusetts and two industry trade groups who were calling for stiffer penalties.

The ruling is another step towards safety for the software giant that was once facing extreme regulatory penalties for anticompetitive behaviour. Back in June 2000, Judge Thomas Penfield Jackson ordered that Microsoft should be spit into two following the software company’s apparent violation of federal antitrust law.

However, although an appeal court upheld some findings that the software maker had abused its monopoly position the following year, it ruled against the break-up of Microsoft. In November 2001, Microsoft and the federal government reached a settlement while the US states remained divided on whether to accept the deal or push for harder penalties.

That settlement has a number of stipulations. It requires Microsoft to disclose server protocols to rivals and offer consistent licensing of Windows to computer manufacturers. It has also prohibited the software company signing exclusive contracts that would prevent software developers or PC makers from using competing products.

Massachusetts and its trade industry cohorts had been pushing the appeal court to take more robust action that would prevent Microsoft from linking its products together. But the court decided that the 2001 settlement encouraged competition and so such a step wasn’t necessary.

“The district court, by remedying the anticompetitive effect of commingling [a term used to describe a company combining its products together], went to the heart of the problem Microsoft had created, and it did so without intruding itself into the design and engineering of the Windows operating system,” says the ruling.

Not surprisingly, Microsoft was quick to praise the decision. “Of all the steps we’ve taken over the past two years, this is the most important step in resolving our legal issues and moving forward,” says Brad Smith, senior vice president and general counsel at Microsoft in a statement. “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.”

But Massachusetts Attorney General Tom Reilly retorted in a statement that the decision was ‘bad news for consumers, bad news for competition and ultimately will be bad news for our economy’. “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,” he added.

Its not yet clear whether Massachusetts will appeal to the US Supreme Court which it has the right to do. But the high court would have to agree to hear the case in the first place.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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