Opponents decry Microsoft private suit deal

Opponents of Microsoft Corp.'s proposed settlement of private antitrust lawsuits will have their day in court on Tuesday. Judge J. Frederick Motz of the Federal District Court of Maryland will hold a public hearing on the proposed agreement of more than 1

Opponents of Microsoft Corp.s proposed settlement of private antitrust lawsuits will have their day in court on Tuesday.

Judge J. Frederick Motz of the Federal District Court of Maryland will hold a public hearing on the proposed agreement to settle more than 100 pending antitrust cases against the software maker.

A range of people are expected to oppose the deal, including Microsoft competitors, class-action lawyers from California and other interest groups.

Last week, Microsoft announced that it had negotiated a settlement to put these cases behind it. The cases were brought against the Redmond, Wash., company last year following the ruling by 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.

On Monday the American Antitrust Institute, a non-profit organization in Washington D.C., released a copy of the letter it had sent to Judge Motz expressing its "distress" at the proposed settlement. "We urge the Court to reject the proposed settlement as unfair or, at the very least, to carve out from the settlement those states that provide for a right of recovery by indirect purchasers," AAI president Albert A. Foer wrote in the letter. The AAI Advisory Board consists of 54 law professors, lawyers, economists, and businesspeople.

U.S. antitrust law holds that only a "direct purchaser" can collect damages in private antitrust suits. The direct purchaser restriction applies nationwide, except in the more than a dozen states like California that have passed laws repealing it.

In all other states, only those users who had bought the software directly rather than preloaded on a computer from an OEM would be able to sue for damages.

Foer said the proposed settlement did not appear to represent a fair and reasonable termination of the more than one hundred private class action suits against Microsoft.

Even if the settlement was deemed fair with respect to consumers in non-repealer states, a national settlement would be "grossly unfair" to consumers in states where a right of recovery had clearly been brought into being and where the plaintiffs "stand ready to go to trial and, indeed, are opposed to a national settlement that would preclude their right of trial," Foer wrote.

Foer went on to write that consumers in repealer states should have the right to have their class actions tried or settled on their own merits.

"Given the large monetary damages to consumers that have been alleged in the various repealer states—in the billions of dollars—the proposed settlement is grossly out of proportion to what is at stake," the letter said. "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," he said in the letter.

Microsoft spokesman Matt Pilla declined to comment on the AAIs letter or on other possible opposition to the settlement proposal except to say that given the size and complexity of the deal, it was natural there would be some dissent.

"We have worked hard with the plaintiffs attorneys on the deal, which will also have a societal impact and bring to an end the costly and lengthy litigation around this," Pilla told eWeek.

The settlement proposal is also expected to face stiff opposition from some Californian class-action lawyers.

Reuters reported on Monday that those dissenting lawyers, who have filed a case on behalf of California consumers, will ask Motz to strike down the settlement or allow their lawsuits to proceed separately in California.

They portray the settlement as a ploy designed to entrench the Windows monopoly while allowing the company to pay back only a tiny fraction of what it actually owes consumers.

Red Hat Inc., the Linux software and solution provider in Durham, N.C., also jumped into the fray last week, offering to provide its open-source software to every school district in the United States free of charge.

Red Hat also is encouraging Microsoft to redirect the money it would have spent on software to the purchasing of more hardware for the some 14,000 poorest school districts.

Matt Szulik, CEO of Red Hat, told eWeek at that time that he had not discussed his offer with Microsoft, nor would he be doing so. "I think the court and the judge are the people to talk to and we will be attending the public hearing on the proposal," he said.