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Archive for Saturday, November 2, 2002

Microsoft settlement gains judge’s approval

November 2, 2002

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— A federal judge on Friday accepted nearly all the provisions of an antitrust settlement between Microsoft Corp. and the Justice Department, but warned top company executives that she would hold them individually responsible for complying with her instructions.

In an enormous victory for Microsoft and founder Bill Gates, U.S. District Judge Colleen Kollar-Kotelly rebuffed arguments by nine states including Kansas and the District of Columbia that tougher sanctions were essential to restore competition in the computer industry.

She concluded that some penalties proposed by those states would chiefly benefit the company's rivals. She made a few minor changes to the settlement that require acceptance by Microsoft and the Justice Department.

The original trial judge had ordered Microsoft split into two parts, touching off two years of wrangling. Friday's result was far more favorable to Microsoft, which helped fuel the computer revolution of the 1990s.

Gates said he was "personally committed" to abide by the agreement, which he called "a good compromise and good settlement." He said Microsoft was unlikely to challenge the decision.

"This settlement puts new responsibilities on Microsoft, and we accept them," Gates said, adding: "At this point, we're not seeing anything that would be cause for appeal, but we need to make a full assessment."

His corporate partner, Chief Executive Steve Ballmer, struck a conciliatory tone toward Microsoft's behavior toward rivals. He said the company has "learned and grown through the experience of the last four years. We are committed to moving forward as a responsible leader in an industry that is constantly, constantly changing."

Atty. Gen. John Ashcroft called the decision "a major victory for consumers and businesses."

The decision gives consumers more choices. It allows Microsoft rivals more flexibility to offer competing software features on computers running Windows. Microsoft has already enacted terms of the settlement, and now allows users of its latest Windows versions to replace some built-in features, such as instant-messaging or music players, with those from competitors.

The states that had rejected the settlement were California, Massachusetts, Minnesota, Iowa, Connecticut, Florida, Kansas, West Virginia, Utah and the District of Columbia.

While rejecting the states' arguments, the judge acknowledged that Microsoft has a "frustrating" tendency not to admit its illegal corporate conduct. She warned Microsoft, the world's largest software company, that she will demand that its directors, especially Gates, enforce the settlement provisions.

Appeals by the states were likely, although state officials said they were still studying their options. They noted that Microsoft is obliged to pay their legal fees.

"We've got plenty of fight," Iowa Atty. Gen. Tom Miller said. "We haven't lost it at all. We need to talk to our colleagues, analyze it more and make a decision."

Miller and his colleagues concentrated on the few changes the judge made to the U.S. settlement that respond to criticisms the states raised. Kollar-Kotelly required Microsoft to disclose some technology to its rivals months earlier than the company and government had agreed.

She also eliminated a technical committee that would have enforced the settlement terms. In its place, a corporate committee consisting of board members who aren't Microsoft employees will make sure the company lives up to the deal. The judge also gave herself more oversight authority.

Microsoft and the government had argued that the settlement they secretly crafted one year ago was sufficient. The agreement, which would last at least five years:

l prevents Microsoft from participating in exclusive deals that could hurt competitors;

l requires uniform contract terms for computer manufacturers;

l allows manufacturers and customers to remove icons for some Microsoft features;

l requires Microsoft to release some technical information so software developers can write programs for Windows that work as well as Microsoft's own products do.

Investors expected a far worse result for Microsoft, driving prices down in the hours before the judge disclosed her decisions. The stock rose slightly, closing at $53 even, down 47 cents.

Microsoft's extraordinary impact on everyday life is hard to understate: Its lucrative Windows and Office products are essential tools for American businesses and government and an important foundation for the technology sector.

The company's market value of $287.6 billion exceeds the gross domestic product of at least 150 nations, including Saudi Arabia and Argentina. Its stock is among the most widely held by investors, especially among mutual funds and retirement accounts.

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