Ripples of the Microsoft Ruling

Some industry observers say ruling could indirectly affect other cases pending against the software giant, here and in Europe.

The antitrust remedies imposed on Microsoft Corp. late last week are widely seen as insufficient to bring about substantive change in the software market, but some industry observers say that the ruling out of the U.S. District Court for the District of Columbia could indirectly affect other cases pending against the software giant, here and in Europe.

The ruling, issued Nov. 1 by U.S. District Court Judge Colleen Kollar-Kotelly, draws predominantly from a settlement proposal crafted one year ago by Microsoft, the U.S. Department of Justice and nine states. The judge rejected as overly broad much of the tougher penalties proposed by nine other states and the District of Columbia, which refused to sign the settlement.

The order provides protection for computer makers against retaliation—and the threat of retaliation—by Microsoft, giving OEMs more flexibility to configure PCs with non-Microsoft software. It also requires the Redmond, Wash., company to offer uniform licensing terms to the 20 largest OEMs, create a compliance committee of board members and disclose communications protocols for interoperability between Windows and server software. It does not impose the kinds of penalties sought by Microsoft rivals who testified on behalf of the non-settling states last spring.

Private antitrust lawsuits filed in the U.S. District Court in Baltimore by industry rivals seeking monetary damages are unlikely to garner support from Kollar-Kotellys decision, legal scholars said. "Either the plaintiffs will be able to prove they suffered monetary harm or they wont," said Norman Hawker, associate professor at Haworth College of Business at Western Michigan University. Hawker added that rivals seeking injunctive relief are likely to be hurt by this months decision in Washington, however.

"I think a judge in a private lawsuit is going to be very reluctant to do something at the request of a private party when a federal judge hasnt done anything," said Hawker, who is also a research fellow at the American Antitrust Institute in Washington. "A judge would be reluctant to give Sun Microsystems something that another judge would not give the attorney general of California."

Proponents of tougher penalties than those imposed by Kollar-Kotelly, including AAI, are placing their hopes in the European Union, where competition regulators are examining Microsofts behavior in the enterprise, server and media player markets. "Ironically, the last best hope for the American consumer is the EU," Hawker said. "They were waiting to see if the United States fixed the problem with respect to the desktop market. Now, if they want those problems fixed, they realize they have to do it themselves."

However, analysts question what penalties Europe could impose that would benefit consumers in the short-run, given the rapid pace of technology and the glacial pace of bureaucracy.

"My view is that they would like to do something more strenuous, but its very unclear what they can do other than fine Microsoft," said Philip Carnelley, analyst at Ovum in London. "One of the problems is that although the behavior of Microsoft has not been good for its competitors, it hasnt actually hurt the consumer all that much."

In her lengthy opinion, Judge Kollar-Kotelly admonished the states for raising new charges of wrongdoing because she saw her job as crafting remedies solely for acts already proven illegal. She did not suggest that the new charges have no merit, however, and she did not suggest that they shouldnt be raised in another venue. "This suit, however remarkable, is not the vehicle through which Plaintiffs can resolve all existing allegations of anticompetitive conduct which have not been proven or for which liability has not been ascribed," the judge wrote.

To some legal scholars, Kollar-Kotellys opinion opens a door for new lawsuits in which the allegations not raised earlier in the liability phase of the case could be considered although it will be difficult for states or companies to gather the political or financial resources to pursue it.