Microsoft Is Sued by Local Governments
After watching computer users wring as much as $1.8 billion out of Microsoft Corp., local governments want their piece.
Six California counties and cities, including Los Angeles and San Francisco, sued the world’s biggest software company Friday for allegedly using its monopoly in personal computer software to overcharge them.
The lawsuit filed in San Francisco Superior Court seeks to get back some of the money the municipalities spent on Windows, Word and Excel programs between 1995 and 2001.
It also asks the court to make the suit a class action on behalf of all local governments in California.
The case comes at a time when Microsoft had hoped its legal troubles were over. Fresh off settlements with consumers, competitors and the federal government, Microsoft last month announced plans to disgorge its cash hoard through a one-time dividend of $32 billion.
Microsoft agreed in 2003 to pay $1.8 billion to settle similar lawsuits brought by consumers, including $1.1 billion in California. But that settlement, which Microsoft will pay in the form of vouchers redeemable for computer-related equipment, didn’t include government.
“When it became clear that governmental entities were going to be excluded from the consumer class action, it was incumbent on all of us to do whatever possible to protect our various municipalities,” said Dennis Herrera, San Francisco’s city attorney.
Joining the cities of San Francisco and Los Angeles are Santa Clara, San Mateo, Contra Costa and Los Angeles counties.
Friday’s lawsuit piggybacks on the antitrust arguments made in previous cases brought by the Justice Department, state attorneys general and competitors such as Sun Microsystems Inc. and Time Warner Inc.’s America Online. It accuses the Redmond, Wash., company of using its dominance in PC software to hurt competition.
City and county officials said Microsoft’s marketplace clout had led to unfairly high prices, but they could not yet determine the amount of the alleged overcharges. “That’s really a matter for expert analysis,” said Mary Wawro, senior assistant counsel for Los Angeles County.
City or county officials interviewed Friday said they had not yet even determined how much their localities had spent on Microsoft products between 1995 and 2001.
Wawro and Matt Szabo, a spokesman for Los Angeles City Atty. Rocky Delgadillo, said Microsoft’s software was widely used on city and county computers.
“The damages are substantial,” Szabo said, adding that the city has paid “greatly inflated prices” for software because of Microsoft’s tactics.
Unlike home computer users, however, local governments in California typically benefit from discounts Microsoft resellers offer to high-volume buyers.
“We firmly believe that we have provided very competitive prices and great solutions to our customers,” said Stacy Drake, a Microsoft spokeswoman.
To settle a class-action lawsuit brought by 27 California consumer groups, Microsoft agreed in January 2003 to provide up to $1.1 billion in refunds and discounts to people who bought Microsoft-powered computers and software from February 1995 to December 2001.
About 14 million people and businesses are eligible, but only a fraction of them have filed claims, said Howard Yellen, chief executive of the Settlement Recovery Center, a San Francisco business that helps people collect shares of class-action settlements.
Even people who file claims are likely to use much, if not all, of their court-ordered discount to buy new Microsoft products because of the company’s software dominance.
Also Friday, Microsoft said it was delaying the release of its next version of Windows -- called Longhorn by the company -- until the second half of 2006, two years after it was originally promised, and delaying some of the most anticipated features by a year.
