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US appeals court upholds Microsoft antitrust deal
22:10 30Jun2004
By Andy Sullivan
WASHINGTON, June 30 (Reuters) - A U.S. appeals court on
Wednesday upheld the government's antitrust settlement with Microsoft
Corp.
The U.S. Court of Appeals for the District of Columbia 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.
The appeals court said a lower court did the right thing when it affirmed the Justice Department's 2001 settlement.
The settlement, approved by District Judge Colleen Kollar-Kotelly,
gives computer makers like Hewlett-Packard Co.
Microsoft also must license key computer code that competitors need to make their server software work well with Windows.
Massachusetts and two technology-industry trade groups had argued the court should force Microsoft to redesign Windows and stop tying Internet Explorer and other products directly into the operating system, a practice known as "commingling."
But the appeals court said the district court struck the right balance by trying to minimize the harmful effects of commingling rather than banning the practice outright.
"We say, Well done!" Chief Judge Douglas Ginsburg wrote.
Consumers could find that many programs would not work well with Windows if outsiders were allowed to modify the operating system, the court said.
"Letting a thousand flowers bloom is usually a good idea, but here the court found evidence ... that such drastic fragmentation would likely harm consumers," Ginsburg wrote.
The same appeals court ruled in 2001 that Microsoft had illegally maintained its Windows operating system monopoly, but rejected another lower-court judge's proposal to break the company in two.
A Microsoft official said the ruling provided more legal certainty for the company and the industry as a whole.
"We're pleased that it takes another significant step forward in adding legal clarity and putting the issues of the past behind us," Microsoft general counsel Brad Smith said at a news conference.
Howard University law professor Andrew Gavil said the opinion did not leave much room for an appeal.
"It brings a extraordinarily important public antitrust case to an end, but only with a whimper," he said. "Despite all the process, not an awful lot was achieved in restoring competition."
Microsoft has settled class-action suits in 12 states and the District of Columbia over the past two years for a total of more than $1.5 billion.
The Justice Department said the ruling proved that the settlement protects against anti-competitive conduct, while Massachusetts Attorney General Tom Reilly said the opinion showed that antitrust laws are not working.
"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 said in a statement.
"We're disappointed, obviously," said Ed Black, president and chief executive officer of the Computer and Communications Industry Association, one of the two trade groups that had challenged the deal. "The settlement remains a failure and it has not served the public interest."
The Software and Information Industry Association was not available for comment.
One antitrust expert said the decision could aid Microsoft's case in Europe, where the company is facing a $600 million fine and an order to sell its Windows operating software without media-player software.
"If you are from Microsoft's perspective, you want every arrow you can put in your quiver, and this is half an arrow," George Mason University Law Professor Ernest Gellhorn said.
Microsoft has asked a European court to suspend that order until a final court ruling, which could take three years or more.
Microsoft's Smith said he hoped EU officials would read the opinion.
"After all, today's decision addresses many of the precisely same questions that are front and center in Europe," he said. Microsoft stock closed up 6 cents at $28.56 on Nasdaq after the news.
(Additional reporting by Susan Heavey and Jeremy Pelofsky)
(c) Reuters 2004. All rights reserved.