Microsoft Violated Antitrust Law, Judge Rules

Article excerpt

A federal judge ruled yesterday that Microsoft Corp. violated federal antitrust law and hurt consumers, a widely anticipated decision that helped drag the Nasdaq Stock Exchange down 349.13 points, its largest point drop ever. U.S. District Court Judge Thomas Penfield Jackson found Microsoft:

* Used its position to "monopolize the Web browser market" to the detriment of competitors.

* Violated another section of the Sherman Antitrust Act by "unlawfully tying its Web browser to its operating system."

* Could be sued under state anti-competition laws.

U.S. Assistant Attorney General Joel I. Klein said the decision against the company Bill Gates built into the world's largest software manufacturer will help consumers.

"It will benefit America's consumers by opening the door to competition, increased innovation and increased consumer choice in the software industry. This landmark opinion - and in the history of antitrust, this is indeed a landmark opinion - this opinion will also set the ground rules for enforcement in the Information Age," said Mr. Klein, head of the Justice Department's antitrust division.

Microsoft officials said almost immediately after the judge released his 43-page ruling that the company will appeal the decision.

"Until the appeal is over, nothing is settled," Microsoft Chief Executive Officer Steve Ballmer said.

Although the ruling was widely expected, shares of Microsoft fell 14.5 percent to $90.88 on Nasdaq yesterday as investors nervously awaited the decision, issued after the markets closed.

Judge Jackson won't issue penalties until later this year. All sides in the dispute will return to court to talk about suggested sanctions the judge should levy against Microsoft.

The judge could mandate a range of penalties, from breaking up Microsoft to more acute remedies like separately marketing its Windows operating system and Internet Explorer Web browser.

Iowa Attorney General Tom Miller, who helped lead the states' effort to negotiate a settlement, declined to say whether the 19 states suing Microsoft would pursue breakup.

Mr. Klein said he will pursue a remedy that ends Microsoft's "unlawful attempt to monopolize the browser market."

"We are, of course, going to seek a remedy that we think will have an enduring impact going forward and one that cures the competitive harms that occurs," he said.

Three California class-action lawyers filed suit Nov. 22 against Microsoft, accusing the company of using its monopoly to overcharge consumers for its software.

After Judge Jackson issued his "findings of fact" in the case Nov. 5 in which he ruled that Microsoft was a monopoly, he appointed a special mediator to help the sides work out a settlement.

Judge Jackson delayed ruling on whether Microsoft broke the law in hopes that U.S. Circuit Court of Appeals Judge Richard Posner could help the company, the federal government and states suing Microsoft negotiate a settlement.

Judge Posner ended talks Saturday after he determined the sides were too far apart to reach an agreement.

Yesterday's decision didn't surprise trial observers. That's because Judge Jackson issued blistering findings of fact in November, concluding that Microsoft was a monopoly, that its monopoly hurt consumers and stifled competition.

Judge Jackson wrote last year that Microsoft "will use its prodigious market power and immense profits to harm any firm" posing a threat.

Given that, observers said, it seemed clear he would decide Microsoft violated antitrust laws.

Even Microsoft officials said they expected the judge to render a decision against them.

"Today's ruling was not unexpected, given the District Court's previous rulings," said Mr. Gates, the company's chairman who stepped down as CEO in January. …