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Microsoft Wins Major Points in Antitrust Settlement Ruling

Judge's decision frees the software giant from new sanctions. Bill Gates calls it a milestone, but California, other states express disappointment.

November 02, 2002|Joseph Menn and Jube Shiver Jr. | Times Staff Writers

WASHINGTON — A federal judge handed Microsoft Corp. a definitive legal victory Friday by approving most provisions of a controversial antitrust settlement with the Justice Department, all but certainly freeing the world's biggest software company from the threat of crippling sanctions.

In a comprehensive ruling full of blunt language, U.S. District Judge Colleen Kollar-Kotelly made clear that the agreement crafted by outgoing federal antitrust chief Charles James struck an acceptable balance: It reasonably restrained Microsoft from continuing to abuse the monopoly power of its Windows operating system without hampering the company's legitimate business practices.

The judge's ruling gives legal force to the detailed settlement plan, requiring Microsoft to release more technical information to competitors about how its products tie together and to refrain from punishing com- puter makers that install non-Microsoft programs for tasks such as surfing the Internet or watching videos.

California and eight other states had sought harsher remedies to counter past and present Microsoft tactics. But many of the tactics weren't relevant under guidelines set out by a federal appeals court, the judge ruled.

"This suit, however remarkable, is not the vehicle through which plaintiffs can resolve all existing allegations of anti- competitive conduct," Kollar-Kotelly wrote.

The Justice Department and Microsoft embraced the long-awaited ruling, and Microsoft Chairman Bill Gates called it a "major milestone" that his company plans to accept.

"It represents a fair resolution of this case," Gates said. "I am personally committed to full compliance."

Wall Street saw a Microsoft victory, and investors bid up company shares as much as 6% when the ruling was officially released after the U.S. stock markets closed. In regular Nasdaq trading, shares fell 47 cents to close at $53.

The biggest change in the year-old settlement plan comes in how it will be enforced. Kollar-Kotelly adopted the renegade states' request that compliance efforts be directed by independent Microsoft board members, saying she would hold them accountable for any failures. Microsoft previously had agreed to pay for a technical committee that would investigate compliance complaints and report to the Justice Department, which would in turn decide whether to complain to the court.

Kollar-Kotelly also gave the states wide latitude to inspect Microsoft documents and interview employees to ensure the sanctions are enforced. And the judge asked to keep jurisdiction of the case in order to act quickly if she determines that Microsoft violates her decree.

"We look forward to our important, continuing involvement in enforcement," said Iowa Atty. Gen. Tom Miller, leader of the states that pushed for tougher provisions. "We believe that the efforts of the nine states and the District of Columbia have resulted in an improvement."

The judge also took the advice of the nine holdout states and ordered that:

* The court would keep the authority to extend the five-year term of the decree by two more years if Microsoft flouts the terms of the deal.

* Microsoft would be barred not only from retaliating against computer makers that install non-Microsoft programs on their PCs but also from threatening to retaliate.

* The computer makers would be permitted to install applications of their choosing that would launch when consumers start up Windows-based machines.

"These are requirements we will be able to adhere to," Gates said.

Kollar-Kotelly wholly rejected more than a dozen other proposals from the states to restrict Microsoft's leverage in such important emerging areas as hand-held computers, Web-based services and software for interactive television.

U.S. Atty. Gen. John Ashcroft praised the ruling, which he said created a healthy environment for the computer industry to develop "technologies with full confidence that their efforts will not be impeded by anti-competitive practices."

But Microsoft foes blasted the decision for embracing inconsequential measures that would do nothing to free the technology landscape from Microsoft's domination.

"The weak steps that Microsoft has taken to comply with the requirements already show that the settlement will be ineffective in curbing Microsoft's monopolistic and anti-competitive practices and how difficult it will be to enforce," said Mike Morris, Sun Microsystems Inc.'s special counsel. Santa Clara, Calif.-based Sun is pursuing a private suit against Microsoft over the company's steps to stem the spread of Sun's Java technology, once viewed as a serious threat to the Windows monopoly.

Even as the states' attorneys general highlighted the modest changes in the settlement, they were clearly disappointed.

"This court focused on looking back on past behavior and trying to make sure it doesn't reoccur, rather than applying the law to try to prevent similar misdeeds in other business areas," California Atty. Gen. Bill Lockyer said.

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