BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh

 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Commonwealth Games 2002

BBC Sport

BBC Weather

Thursday, 28 June, 2001, 22:43 GMT 23:43 UK
Analysis: Settlement possible
Microsoft chairman Bill Gates and US appeals court logo
New remedy "unlikely to be too onerous" for Bill Gates and Microsoft
By anti-trust lawyer Stephen Paul Mahinka

A 125-page decision by a US appeals court is not going to be easy to follow, nor susceptible to any one interpretation.

But the decision reversing the trial court's ruling breaking up Microsoft must, in my view, on balance be viewed as a victory for Microsoft.

In essence, the appeals court commuted the "corporate death sentence" of dissolution into parts that were the remedy imposed by the trial court.

The appeals court made three decisions about the trial court's legal rulings:

  • First, it agreed with the trial court that there were several violations of the monopoly provision of the US antitrust laws, Section 2 of the Sherman Act, affirming most, but not all, of the allegations that Microsoft has monopoly power in the computer operating systems market and had abused that power through various of its licencing and marketing practices.
  • Second, the appeals court completely rejected the trial court's finding that Microsoft had engaged in activities to attempt to monopolise the browser market, also in violation of Section 2.
  • Third, the appeals court remanded to the trial court for a reconsideration under a different standard the findings of the trial court that certain of Microsoft's sales practices, allegedly "tying" sale of one product to another, were unlawful under the conspiracy provision of the antitrust laws, Section 1.

    The trial court now has to assess challenges to those practices under the "rule of reason" standard, offering Microsoft a chance to justify its practices, rather than the "per se" standard the trial court used, under which Microsoft could offer no business justification.

Sweeping remedies rejected

On balance, the result of these appeals court rulings is positive for Microsoft.

The Clinton administration Department of Justice (DoJ), supported by a minority of the US states, had argued vociferously for dissolution as a remedy. That has been soundly rejected.

They had argued for per se tying condemnation of Microsoft selling practices. That has been rejected.

They had argued for sweeping remedies, and that has, as the appeals court notes on several occasions, been "drastically altered," so much so that, as the trial court follows the dozens of pages of instructions in the appeals court's opinion on how to proceed with the case on remand, only a conduct remedy will be acceptable on further appeal.

Inflammatory comments

Finally, because of the trial court judge's unusual and highly inflammatory comments to journalists and others during the latter portions of the trial, the appeals court has ordered the trial court judge removed from the case.

The trial judge had, among other things, stated the Microsoft founder Bill Gates' "testimony is inherently without credibility," and compared Microsoft executives with "drug traffickers."

A new trial judge will be appointed to consider the remaining issues and fashion a new remedy.

That remedy is unlikely to be too onerous to Microsoft.

The abysmal experience with a complex, heavy-handed, regulatory-type consent decree in the AT&T settlement, which led to two decades of judicial supervision of large segments of the telecommunications market, make it unlikely that the DoJ will propose, or the trial court will be enthusiastic in imposing, any such remedy.

Settlement talks likely

Though some of the states may attempt to appeal the decision to the Supreme Court, it is likely that no appeal will be accepted until the trial court has refashioned the remedy.

Indeed, settlement talks may be expected between the company and the new Bush administration DoJ, together with some of the states.

While the last chapter in this contentious saga is far from written, the decision relieves Microsoft of the threat of break-up and, though confirming that it will be subject to some type of injunction limiting its past practices, likely enables it to continue to operate effectively in the marketplace.

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories