BBC News Online: Business

Microsoft faces class action lawsuit

Microsoft is also waiting for a Supreme Court decision

This is the first time such a case has been allowed to proceed against the software giant. Its share price fell nearly $1 to close at $70 on Wednesday.

The case alleges that Microsoft used its dominant market position to overcharge customers for its software.

In June this year, District Judge Thomas Penfield Jackson said that Microsoft should be split in two as its sentence for abusing its dominant position in the personal computer operating system market.

Indirect link

Most consumers usually buy personal computers where the software has been already installed.

As such, they are indirect purchasers of Microsoft's software. Under Californian law, indirect purchasers can sue for damages.

Similar cases have been dismissed in other states in the US.

"This case involves a very large number of claimants with relatively small amounts at stake," Superior Court Judge Stuart R. Pollak said. "Most consumers have little incentive to litigate independently since the costs of litigation undoubtedly would overwhelm their potential recovery."

Microsoft had urged the court not to allow the case to proceed because of the difficulty in determining damages.

Judge Stuart R. Pollak has set a hearing for the case on 4 October.

"Given California law, this ruling was not unexpected... This is just one step in a long process and we believe that at the end of this case it will be shown that the conduct being challenged by the plaintiffs does not harm consumers," Microsoft spokesman Jim Cullinan said.

Waiting and hoping

There are over 130 consumer class-action suits currently pending against Microsoft in the US.

The majority of these cases were filed after Judge Thomas Penfield Jackson's decision.

Microsoft is likely not to want to settle these cases but to "wait and hope that they can overturn this ruling in Washington, in which case they'll be in a much better position in these civil suits," Richard Donovan, head of the anti-trust practice at Kelley, Drye & Warren said.

Microsoft is also expected to hear on 4 October if the US Supreme Court will hear its appeal or allow it to be heard first by a lower appeal court.