WASHINGTON -- A U.S. appeals court on June 30 unanimously approved the landmark antitrust settlement Microsoft Corp. (Nasdaq: MSFT) negotiated with the Justice Department, setting aside objections by Massachusetts that sanctions were inadequate against the world's largest software company.
In a significant victory for Microsoft and the Justice Department, the appeals court ruled 6-0 that the settlement was "in its entirety" in the public's interest. The decision relieves Microsoft's biggest courtroom headache in the United States.
In exuberant language, the U.S. Circuit Court of Appeals for the District of Columbia applauded provisions of the complex settlement that permit computer makers to hide Microsoft's built-in Web browser software so that consumers can more seamlessly use software from Microsoft's rivals.
"We say, Well done!" the court wrote.
Microsoft's top lawyer, Brad Smith, described the 83-page decision as a "clear and emphatic message" that its settlement with the Bush administration was proper.
The Bush administration's top antitrust official, Assistant Attorney General R. Hewitt Pate, called the ruling a "resounding victory for the Justice Department and American consumers."
The appeals court said an alternate settlement proposal from Massachusetts to require Microsoft to remove parts of its software from the dominant Windows operating system could hurt consumers by leading to a confusing world with different versions of Windows.
"Letting a thousand flowers bloom is usually a good idea, but here the court found evidence ... that such drastic fragmentation would likely harm consumers," the court wrote.
The court also rebuffed a plan by Massachusetts to require Microsoft to reveal the secret blueprints for its Web browser, saying such a move might help the company's rivals but not help competition flourish.
Trading in Microsoft jumped as the decision was disclosed, but its price remained largely unchanged late last Wednesday at $28.56, an increase of 6 cents.
The court did permit two anti-Microsoft trade organizations in Washington, the Computer and Communications Industry Association and the Software and Information Industry Association, to seek tougher sanctions against Microsoft.
But the appeals judges predicted their efforts would lead nowhere, saying the groups' arguments have "no merit," and noting that the lower courts have already considered and rejected many of those arguments.
Massachusetts' attorney general, Tom Reilly, said the appeals court had shirked its responsibility for enforcing U.S. antitrust laws and granted Microsoft status as a protected monopolist.
"Anybody with a straight face -- I guess they did this with a straight face -- it's hard to understand how they can find that agreement is in the public interest," Reilly said in a telephone interview.
The decision is a significant milestone in the long-running antitrust dispute, which began in the early 1990s. Any court-ordered changes to the design of Microsoft's lucrative Windows software would have reverberated across homes, industries and governments since its products run more than 95 percent of the world's personal computers.
The ruling followed a March 24 decision by European antitrust regulators, who concluded that Microsoft unfairly hurt rivals by building its multimedia software into Windows.
The European Commission fined Microsoft a record $613 million. It agreed this month to suspend its decision pending a ruling on whether sanctions should be delayed while Microsoft appeals.
The Microsoft settlement, approved in November 2002 by U.S. District Judge Colleen Kollar-Kotelly, was aimed at giving consumers more choices by, among other things, helping rivals develop competing software on computers running Windows. The provisions expire in 2007.
The appeals court in Washington has proved a largely favorable venue for Microsoft. The court removed two other trial judges from the case, in 1995 and 2001, who had ruled against the company, Stanley Sporkin and Thomas Penfield Jackson. It also overturned a Jackson contempt ruling against Microsoft, and blocked Jackson's plans to break the company apart.
The same appeals court unanimously agreed with Jackson's ruling that Microsoft had illegally abused its monopoly over Windows operating system software, and it instructed Kollar-Kotelly to impose new sanctions. Within months -- and soon after the Sept. 11, 2001, terror attacks -- the sides instead negotiated the disputed settlement.
U.S. Circuit Court ruling: http://wid.ap.org/documents/courts/msft.pdf
Massachusetts attorney general: www.ago.state.ma.us
Justice Department: www.usdoj.gov/atr
Oversight technical committee: www.thetc.org