Microsofts Win Called Nail in Antitrust Coffin

 
 
By Matthew Hicks  |  Posted 2004-06-30
 
 
 

Microsofts Win Called Nail in Antitrust Coffin


Microsofts victory in a U.S. Court of Appeals ruling Wednesday largely ends the Department of Justices 6-year-old antitrust case against the software maker and removes a major financial barrier for the company.

Wednesdays ruling struck down Massachusetts appeal of a 2001 settlement between Microsoft Corp. and the DOJ. Massachusetts was seeking stronger remedies against the Redmond, Wash., company.

Analysts and attorneys reacting to the ruling said it was an expected decision and one that is unlikely to be reconsidered by the U.S. Supreme Court if the Commonwealth of Massachusetts were to decide to make a final appeal.

"Its a definitive nail in the plaintiffs coffin, and its doubtful that the Supreme Court would pry it back open," said Hillard Sterling, a principal at Chicago-based law firm Much, Shelist, Freed, Denenberg, Ament & Rubenstein PC.

"Massachusetts would have to show the Supreme Court a compelling reason why it should reach out and grab this case and turn it upside down. There isnt such a reason, aside from the states distaste."

A spokeswoman for Massachusetts Attorney General Tom Reilly said his office is still reviewing the decision and has not made a decision on whether to appeal to the Supreme Court.

For Microsoft, the latest victory in its U.S. antitrust case gives it more leeway in its financial plans. Wall Street analysts have wanted Microsoft to use its substantial cash reserves to issue a dividend or to buy back stock, an issue the company is expected to address during its July analysts meeting.

Microsoft general counsel Brad Smith said in a news conference that Wednesdays decision will give the company more financial flexibility.

"We were very focused on waiting for this decision from the Court of Appeals, and todays decision does remove the last area of legal doubt that we were considering as a factor before we felt that we could move ahead with decision-making with respect to the companys financial reserves," said Smith, a Microsoft senior vice president.

Next Page: Microsofts not done with antitrust suits yet.

More Antitrust Suits


While the ruling was an expected victory for Microsoft, the company remains embroiled in other antitrust litigation. In early June, it appealed the European Unions antitrust ruling, which imposed a $611 million fine and ordered Microsoft to offer a version of Windows without Windows Media Player.

The U.S. Appeals Court ruling has no legal bearing on the ongoing EU case, Sterling said, though the victory is likely to bolster Microsofts confidence going into the EU appeal.

"Microsoft will use this as another bullet in its weaponry overseas, but all it is is one piece of ammunition, and Microsoft will need to win or lose the case on its underlying merits," Sterling said.

Microsoft already is drawing parallels between the findings in the U.S. Appeals Court ruling and its EU appeal. Smith said that while overseas courts will have to make their own findings based on different laws, a central question remains the same: whether removing code from Windows helps or hurts consumers and competition.

"As this court today concluded, removing code from Windows would hurt consumers rather than help them and would hurt the software industry rather than help [it]," Smith said. "Theres no reason to think that the answer should be any different in any other country. The facts are the same."

In past statements, Mario Monti, the European Unions competition commissioner, has defended the EUs sanctions and expressed confidence that the EU ruling would be upheld on appeal.

The U.S. Court of Appeals also denied requests from two trade groups, the Computer and Communications Industry Association and the Software and Information Industry Association, to overturn the antitrust settlement.

Microsoft is far from being free and clear from antitrust litigation in the United States. Microsoft faces government and court oversight under the settlement through 2007, and any misconduct could be grounds for another case, said Matt Rosoff, an analyst at Directions on Microsoft, in Kirkland, Wash.

Rosoff noted that the Justice Departments antitrust investigation stemmed from alleged violations of an earlier settlement.

"This phase of the antitrust battle in the U.S. is over, but Microsoft must continue to accept government oversight and the threat of sanctions, as well as private antitrust lawsuits, as a permanent condition of doing business," Rosoff said in an e-mail interview. "Thats one of the negative effects of having the courts decide you have a monopoly."

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