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Friday, 1 November, 2002, 21:57 GMT
Microsoft court case: What's it all about?
Bill Gates with Microsoft Windows
Bill Gates says Microsoft is good for consumers
A court has, by and large, approved a settlement that the US Justice Department has reached with Microsoft on its long-running anti-trust case. BBC News Online explains the background to the case.

Microsoft trial? I thought that was long over?

Well, yes, kind of. A year ago the US government struck a settlement deal with Microsoft, four months after the software firm had been found guilty of acting as a monopoly.

Practices banned by US antitrust law
Monopolies "in restraint of trade"
"Predatory pricing" at below cost to drive out competitors
"Price-fixing", an agreement among several competitors to fix prices or restrict output

Microsoft was found to have made it difficult for other software firms to put their products on personal computers running on Windows.

This violated US anti-trust law, but the so-called remedy proposed by the original trial judge - which involved breaking up Microsoft into two companies - was thrown out on appeal.

During the past year, District Court Judge Colleen Kollar-Kotelly has deliberated the merits of this settlement. She has listened to a large number of experts who approved or objected to the settlement.

She also presided over a separate court case brought by nine US states that don't like the settlement and continued their legal action against Microsoft.

So who likes the settlement then, and who doesn't?

The case against Microsoft had been brought by the US Justice Department as well as 18 states and Washington D.C.

Half the states joined the Justice Department's settlement, but nine continued with the lawsuit.

The holdout states, which include California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia plus the District of Columbia, have said the government's settlement is riddled with loopholes that would allow Microsoft to continue its discriminatory ways.

They want Microsoft to offer a pared-down version of its Windows operating system.

And during the settlement hearings, most of Microsoft's competitors pressed for tough measures against Microsoft.

Given that the settlement is, by and large, approved - who is the winner?

It's still up in the air who the real winner is. On the face of it, Microsoft has won. It has avoided being split up, and the most drastic of the proposed measures against the software giant have been set aside.

However, the appeals court confirmed that in one key point Microsoft still stands guilty as accused: The firm used illegal practices to maintain its monopoly position.

Under the settlement, Microsoft has agreed to a raft of restrictions, including a panel of independent monitors to oversee its conduct and review its accounts.

Crucially, Microsoft will be obliged to provide rival software firms with information to allow them to develop competing products, and ensure those products work with the Windows operating system.

And this will now have to happen quicker than Microsoft and the Justice Department had agreed.

The restrictions "will stop Microsoft's unlawful conduct, prevent recurrence of similar conduct in the future and restore competition in the software market, achieving prompt, effective and certain relief for consumers and businesses," the Department of Justice says.

Many of Microsoft's competitors doubt that the measures will be that effective.

What exactly was Microsoft accused of doing wrong?

The US Department of Justice alleged that Microsoft had used its domination of the operating system market to restrict competition.

Microsoft licensed its operating system more cheaply to computer makers such as Dell and Compaq, if they exclusively installed its software.
IBM notebook
IBM lost out on PC sales

When IBM refused to drop sales of its own rival operating system and software packages, it lost millions of dollars worth of sales by not receiving the crucial details of Windows 95 until 15 minutes before it launched. Other PC makers had computers with it installed and ready to ship.

But the key element involved the way in which Microsoft forced its Internet Explorer browser to leadership in a market which had been dominated by Netscape's Navigator.

The trial heard that Microsoft not only gave away Internet Explorer but also "bundled" it into its Windows operating system, forcing manufacturers to pre-load it on to their computers.

Even if users wanted to use Navigator instead, the trial heard that its performance was not as quick, and that Internet Explorer would be triggered as the default browser for a variety of functions.

Microsoft also encouraged Apple to pre-install Internet Explorer on its PCs, even though it used a different operating system.

Microsoft swiftly succeeded in winning a half share in the browser market.

It was also alleged to have modified Sun Microsystem's Java products so that they ran only on Microsoft's operating system. Java had been designed to be a language which could run all operating systems - something Microsoft did not want.

What was Microsoft's defence?

Microsoft said that it faced a great deal of competition and that its actions reflected that fact.

The consumer also gained from its actions as they received a free internet browser, when previously Navigator had been charged for.

Tell me more about Microsoft!

Microsoft is one of the world's largest companies by market value.

It provides the operating system for about 80% of the world's personal computers.

An operating system is the basic program which, when loaded into a computer, makes it work.

Any software, such as games or Word, needs to be compatible with the operating system for it to work.

As well as producing the operating system which runs the vast majority of the world's PC's the company also produces a range of software products, such as Word and Excel which run smoothly on its operating system.

Because its operating system is so dominant, companies or individuals writing software have tended to write for its system rather than for rivals such as Apple.


The settlement

Appeal court ruling

Appeal hearing

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


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