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August 30, 2007 11:08 AM

DOJ says Microsoft antitrust settlement a success; California, other states disagree

Posted by Benjamin J. Romano

The Department of Justice issued a news release this morning saying, "competition and consumers have benefited from the final judgments entered because of the Department's antitrust enforcement efforts against Microsoft."

The Justice Department was joined by a handful of states. But several others, known as the California group, disagreed.

From Bloomberg News:

Antitrust regulators from California and five other states said in a filing today that Microsoft still maintains a monopoly over personal computer operating system software and some provisions of the settlement have yielded "little, if any, tangible pro-competitive results."

"There can be little doubt that Microsoft's market power remains undiminished,"' state regulators said in the filing in federal court in Washington. Key provisions of the settlement "have had little or no competitively significant impact."

The California group never agreed to the final judgment and was forced to join in it.

The Justice Department release was timed to a series of filings by the parties in the broad antitrust settlement, most of which expires this November, including Microsoft, the department and the states.

In a statement this morning, Microsoft General Counsel Brad Smith noted that the company intends to continue its compliance with terms of the settlement after it expires and codified its own view of its responsibilities in a set of Windows Principles issued last year.

"As it was specifically intended, the Consent Decree defined clear rules for how Microsoft competes without pre-ordaining winners in the technology marketplace. The Consent Decree shaped how we view our responsibilities and led us to adopt a set of voluntary principles that will continue to apply even after major parts of the U.S. antitrust ruling expire this November," Smith said.

The Justice Department cited several examples of middleware competitors -- including Web browsers such as Mozilla's Firefox, Opera, and Apple's Safari; and multimedia players from Apple and Adobe -- to support its assertion that the final judgment has protected competition. I asked a department spokeswoman for the hard data on which these statements are based; she said she would get back to me.

It's important to note -- and the Justice Department does -- that the settlement was aimed only at preserving competition in this middleware software category. It was not an attempt to roll back Microsoft's monopoly in operating system software. Windows is still the dominant OS, running more than 90 percent of the world's computers.

From the department's statement:

"The core allegation in the original lawsuit, upheld by the U.S. Court of Appeals in June 2001, was that Microsoft had unlawfully maintained its monopoly in PC-based operating systems by excluding competing software products known as middleware that posed a nascent threat to the Windows operating system. Specifically, the Court of Appeals upheld the District Court's conclusion that Microsoft engaged in unlawful exclusionary conduct by using contractual provisions to prohibit computer manufacturers from supporting competing middleware products on Microsoft's operating system, prohibiting consumers and computer manufacturers from removing access to Microsoft's middleware products in the operating system, and reaching agreements with software developers and third parties to exclude or impede competing middleware products."

It continued,

"[A]s Microsoft was never found to have acquired or increased its monopoly market share unlawfully, the final judgments were not designed to eliminate Microsoft's Windows monopoly or reduce Windows' market share by any particular amount. Rather, the final judgments were designed to re-invigorate competitive conditions that Microsoft had suppressed so that the market could determine the success of these software products. The final judgments are succeeding in that goal."

Here's the Justice Department's final judgment review, filed today with the court. (PDF, 11 pages).

Microsoft also filed its own report on the final judgment (PDF, 12 pages), supported by two expert reports (PDF, 44 pages), (PDF, 45 pages).

Update: Here is the filing from the California group. (PDF, 21 pages).


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