Microsoft settles private lawsuits

Microsoft allegedly overcharged for software

Microsoft has settled more than 100 private anti-trust lawsuits by promising to donate more than $1bn to poor US schools.

The software giant will donate the money - in the form of software, computers and training across five years - to more than 12,500 schools.

Steve Ballmer: 'This is a fair and reasonable solution'

The private suits had alleged that Microsoft overcharged millions of computer buyers through abuse of its monopoly power in the software market.

"We believe this is a fair and reasonable solution that will benefit consumers, the hi-tech industry, and the overall US economy," said Microsoft's chief executive, Steve Ballmer.

"It is a settlement that avoids long and costly litigation for the company and at the same time I think it will really make a difference in the lives of some of the most disadvantaged students in the country," he added.

A company spokesman explained the money would pay for teacher training, technical support, refurbished computers and almost unlimited applications of Microsoft's most popular software, such as Windows and Office.

Seeking approval

The deal must be approved by the US District Judge J Frederick Motz in Baltimore, Maryland, before it can go ahead.

This is an innovative and visionary settlement that resolves these complex lawsuits by providing great benefits to public schools

Michael Hausfeld
Lawyer representing plaintiffs

If it is approved, the company will record a pre-tax charge of $550m for its second quarter ending in December.

A public hearing of the deal is scheduled for 27 November.

The settlement proposal was devised by one of the lawyers representing the group of private plaintiffs, Michael Hausfeld of Cohen, Milstein, Hausfeld & Toll.

Unorthodox idea

Mr Hausfeld said he thought of the idea nine months ago after working out that each of the 65 million computer buyers bringing the suits would receive as little as $10 from a $1bn settlement.

Some lawyers representing clients in California are said to oppose the idea because it does little to curtail Microsoft's anti-competitive behaviour.

"This is an innovative and visionary settlement that resolves these complex lawsuits by providing great benefits to public schools," said Mr Hausfeld.

The donation will benefit about 14% of US schools, said Cathy MacCaul, communications manager for Microsoft community affairs.

Legal problems

Earlier this month, the software giant also agreed to settle its separate three-year-old case with the Justice Department.

However, nine US states are continuing to pursue Microsoft.

The private lawsuits were brought after the government filed its anti-trust suit against the software company in 1998.

Roger Kay, an analyst with IDC, called the settlement "a huge victory" for Microsoft.

"It's amazing to me how favourable this is to Microsoft," he said.