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Review of 2001 Friday, 28 December, 2001, 03:27 GMT
Microsoft celebrates a good year
Bill Gates
The settlement came after the September attacks
Kevin Anderson

Microsoft's legal team always knew that they had time on their side.

They wanted their day in the United States Appeals Court, which had handed the software giant a victory in an earlier battle in the anti-trust war with the federal government.

And they thought they might get a better hearing under a Republican administration, which generally tend to be more business-friendly and more sceptical of invoking anti-trust law.


Bill Gates has a lot to celebrate come New Year's Eve

The strategy seems to have paid off for the software giant with settlements pending in both civil anti-trust suits and the anti-trust case brought by the US government and several states.

But Microsoft is not completely in the clear. Nine states have refused to sign on to the settlement, with one state launching a new anti-trust suit against the company.

European regulators are also still investigating Microsoft's market behaviour in the field of server software.

Appeals court victory

But there is no doubt that Microsoft stands in a much better position than it did a year ago.

The software empire that Bill Gates built was in danger of being dismembered. The company had been branded a monopolist.

At the end of 2000, district court Judge Thomas Penfield Jackson ruled that the company had broken US anti-trust law and should be broken in two.

Steve Ballmer, chief executive
Steve Ballmer described the settlement as a 'fair and reasonable solution'
But the new year quickly brought new hope for Microsoft.

After successfully challenging efforts to have the case sent directly to the US Supreme Court, the company managed to go to the Appeals Court in February.

It believed it would receive a fairer hearing before the Appeals Court, convinced that Judge Jackson had grown hostile.

The judge's ruling used damning language to paint Microsoft as "a recalcitrant monopolist."

But he did not confine his harsh comments to his judicial ruling, he also openly criticised the company in interviews with the press.

He told reporter Ken Auletta that he believed Bill Gates had a Napoleonic complex and said the company's executives "don't act like grown-ups".

These comments would be the judge's undoing. The Appeals Court overturned parts of Judge Jackson's ruling and removed him from the case.

Settled?

However, the court did not hand Microsoft a total victory.

The judges sent the case back to a lower court and assigned Judge Colleen Kollar-Kotelly to fashion out a new remedy.

She quickly made it clear that she preferred it if the two sides could come to a negotiated settlement, and the attacks of 11 September in New York and Washington only reinforced her belief that a settlement was preferable to a lengthy court battle.

Bill Gates
Microsoft will have to co-operate with its rivals
She urged both sides to enter into non-stop talks until a settlement could be agreed upon, and in November, the federal government and Microsoft announced that they had settled the case.

The company agreed to be monitored by an independent three-member panel. Microsoft also agreed not to retaliate against computer makers for installing non-Microsoft software on their machines.

And it forced the company to release information about the Windows operating system to other companies so that they could develop competing products.

Analysts called it a Microsoft victory and largely agreed that the company had gotten off rather lightly.

However, nine of the 18 states in the case refused to sign the deal and are, instead, pursuing further remedies against Microsoft. Another state, West Virginia, has filed a new anti-trust case in a state court.

Packs of new Windows software
The row centres on the Windows operating system
But Microsoft scored another anti-trust victory by proposing to settle hundreds of private anti-trust suits.

The company offered to give software, training and technical support valued at more than $1bn to disadvantaged schools in return for the settlement.

But this has also come under criticism. Some companies, including Apple Computers which shares a strong presence in US schools, say that the offer would reward Microsoft by allowing it to expand its dominance.

Microsoft will look back at 2001 as a very good year. They escaped being broken in two, managed to secure the basis for very favourable settlements in their anti-trust battles and released a major upgrade to their flagship product - the Windows operating system.

Bill Gates has a lot to celebrate this New Year's Eve.

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21 Dec 01 | Business
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