Critics Hit Microsoft Settlement as Hearing Continues

The public hearing, held at the federal District Court in Baltimore, went on well into the evening and no decision was expected immediately

U.S. District Court Judge J. Frederick Motz on Tuesday heard evidence for and against the proposed settlement of more than 100 private antitrust cases against Microsoft Corp.

The public hearing, held at the federal District Court in Baltimore, went on well into the evening and no decision was expected immediately.

By 7:15pm EST Microsoft had not yet presented its arguments in favor of the settlement. But Microsoft spokesman Jim Dessler told eWEEK that the court had heard powerful testimony over the day offering compelling evidence why the proposed settlement was appropriate.

"The Judge has indicated he will continue to accept comments after today and will decide by mid-December whether or not to give preliminary approval for the proposed settlement," he said.

Last week, Microsoft announced that it had negotiated a settlement to put these cases behind it. The cases were brought against the Redmond, Wash., software maker last year following the ruling by federal District Court Judge Thomas Penfield Jackson that Microsoft had violated two sections of the Sherman Antitrust Act.

The proposal calls for Microsoft to donate more than $1 billion in software, reconditioned computers, services and training to thousands of schools in the United States.

But opponents of the deal say it doesnt go far enough to compensate everyone named in the class-action suits and allege it doesnt punish Microsoft at all – in fact it gives the software firm a leg-up into the lucrative educational market.

Apple Computer Corp., which claims that half of the computers in education today are its computers, filed a 30-page brief opposing the proposed agreement.

"We are baffled that a settlement imposed against Microsoft for breaking the law should allow, even encourage, them to unfairly make inroads into education--one of the few markets left where they dont have monopoly power," Apple CEO Steve Jobs said in a prepared statement.

Jobs is not alone in this view. On Monday, the American Antitrust Institute, a non-profit organization in Washington, released a copy of the letter it had sent to Judge Motz expressing its "distress" at the proposed settlement.

AAI president Albert Foer said in his letter that "the proposed settlement is grossly out of proportion to what is at stake. Not only does it fail to provide any benefit directly to the consumer class, it also fails to achieve any of the benefits that the antitrust laws anticipate through their unique private attorney general function."

Furthermore, the proposed settlement, in which Microsoft would place computers and its own software into the public schools where future Microsoft customers could be trained, "is the type of punishment that Brier Rabbit sought in the brier patch," Foer said in the letter.

Ed Black, the president of the Computer & Communications Industry Association, also filed a letter with Judge Motz in which he said the court-ordered distribution of free Microsoft software would be "tantamount to judicially sanctioned predatory pricing by a monopolist in a critical market."

Microsoft had come to dominate many of the most critical software markets largely through the use of illegal, anticompetitive tactics, he said, adding that it had faced some competition in the market for client operating systems - most notably from Apple in the education sector.

"Access to this market is considered key to attracting and retaining users for future sales. By allowing Microsoft to flood the education market with free software - at virtually no cost to the company - the court will be virtually assuring that no other competitor will be able to charge for its products. The foreclosure of this market to competition and consumer choice will only facilitate the continuation of Microsofts unlawful monopolistic strategy," Black said in his letter.

But Microsofts Desler said he "respectfully disagreed" with the assessments by Apple and others since the proposed settlement was platform neutral and certain of its provisions expressly addressed these concerns. "The deal is structured in such a way that the schools will decide what is best for them," he said.