Antitrust Pact With Microsoft Is Thrown Out
Throwing precedent to the wind, a federal judge rejected a controversial antitrust settlement between software giant Microsoft Corp. and the Justice Department, saying Tuesday that the pact is not in the public interest and “does not constitute an effective antitrust remedy.”
The decision by U.S. District Judge Stanley Sporkin is the latest in a string of embarrassing setbacks for the Justice Department and its antitrust chief, Anne K. Bingaman, who was supposed to usher in a new era in antitrust enforcement. It was likewise a serious blow to Microsoft, which may now face a renewed investigation of its business practices.
The consent decree, signed in July following a five-year investigation by the Federal Trade Commission and the Justice Department, would have forced Microsoft to change the way it licenses its operating system software, which controls the basic functions of a personal computer. But many of Microsoft’s competitors were deeply dissatisfied with the agreement, alleging that it did not address a range of unfair business practices and would not prevent Microsoft from extending its dominance of the PC software industry.
Sporkin, in a 45-page opinion, found that Microsoft “has a monopoly on the market for personal computer operating systems” and said the two parties “have been unable and unwilling adequately to address certain anti-competitive practices, which Microsoft states it will continue to employ in the future . . . .”
Legal experts said Tuesday that it is unprecedented for a federal judge to defy the Justice Department and throw out a consent decree.
“It’s fair to say Sporkin’s decision is unique and highly unusual. I’d say it’s the first of its kind,” said Washington lawyer Caswell Cobbs, who heads the American Bar Assn. section on antitrust law.
Microsoft spokesman Erin Carney said the company was disappointed with the ruling but reserved further comment until company officials had time to read the opinion. Justice Department officials said they were also reviewing the ruling and had no comment.
It was unclear Tuesday what would happen next. Either the Justice Department or Microsoft could appeal Sporkin’s ruling--and some lawyers said they believe an appeal would stand a strong chance. The Justice Department could also try to negotiate a new agreement with Microsoft that would pass muster with Sporkin. The judge set a March 16 hearing to determine how to proceed.
Some compared Sporkin’s decision to the critical judicial review of the historic pact between the Justice Department and AT&T; in the mid-1980s. In that case, U.S. District Judge Harold Greene insisted on numerous modifications, and he remains a de facto regulator of the telecommunications industry.
Although Sporkin is unlikely to gain such powers, Penelope Pereovolos, an antitrust lawyer at the Morrison & Foerster law firm in San Francisco, said Sporkin would likely try to force the government to strengthen aspects of the decree and demand to be involved in its enforcement.
“I would not be surprised to see him more involved in the enforcement of the consent decree,” she said.
During a contentious hearing last month, Sporkin said his concerns about Microsoft were kindled when he read the 1992 book “Hard Drive: Bill Gates and the Making of the Microsoft Empire,” about the company and its founder. He focused particularly on an alleged practice of announcing products before they were ready in order to discourage competition. Many of Microsoft’s competitors also charge that the company gains an unfair advantage in selling software applications, such as spreadsheets and word processors, because of its control over the operating software MS-DOS and Windows.
Sporkin, a former director of enforcement at the Securities and Exchange Commission, cited three other reasons for his ruling: The parties failed to provide the court with the information it needed to make a public-interest determination; the decree was too narrow in scope, and it failed to address concerns about certain Microsoft marketing practices.
A recent court filing on behalf of unnamed Microsoft competitors named Andrew Shulman, a former computer programmer and author of two books on Microsoft software, among several industry officials who called the decree ineffective because it did not address the issue of pre-announced products. Shulman said the pact contained “an extremely large loophole through which Microsoft” could wiggle out.
Another critic of Microsoft, whose complaints were also sent to Sporkin, said Tuesday he believes the rejection of the agreement may lead to a more competitive industry.
“I think this is more than just a victory for the software industry; this is a victory for all of those opposed to monopoly,” said David McCracken, an Aptos, Calif., software engineering consultant. “Bill Gates and Microsoft have a powerful vision, and much of it is correct, and I don’t think that a judge’s decision to require them to play fair will hurt them.”
Reaction among many in the software industry was muted, however, as Microsoft’s competitors waited to see what would happen next.
“I think I’ll save the champagne,” said Joseph Gugliemini, president of the Apple-IBM joint venture, Taligent.
“If this turns out to be three years of appeals, who cares? I’m just going to keep my head down and get my product out.”
Times staff writer Leslie Helm in Seattle contributed to this story.
* INDUSTRY IS GUARDED: Microsoft’s rivals remain skeptical of government’s ability to rein in the software giant. D1
