Microsoft Guilty of Antitrust Violations

U.S. District Judge Thomas Penfield Jackson found late Monday that Microsoft Corp. has violated the Sherman Antitrust Act by undertaking illegal anti-competitive actions to maintain its monopoly on personal computer operating systems.

Jackson said the software maker used its power in the industry to “monopolize the Web browser market” to the detriment of competitors. After years of legal wrangling and settlement talks that stalled this past weekend, the judge also found that Microsoft could be liable under state anti-competition laws.

In his ruling, the judge accepted 23 or 26 arguments brought forth by the 19 states that joined the federal government in the case.

“We are very pleased with the court’s ruling,” said Assistant Attorney General Joel I. Klein. “The decision will benefit consumers and stimulate competition and innovation in the high-tech industry.”

Microsoft Never Wavered

Jittery investors sent Microsoft’s stock plunging 15 3/8 to 90 7/8 Monday as investors braced for an expected guilty verdict in the trial.

Microsoft has steadfastly maintained its innocence and fully intends to appeal the ruling. Throughout the proceedings, the company has portrayed itself as simply a tough competitor that played fair in a still-evolving industry.

Before the verdict was rendered, Microsoft chairman Bill Gates said that regardless of how the judge ruled, his company would continue to integrate the Internet into its Windows software. That packaging is exactly what the Justice department has been questioning.

“The ruling is just a step in the legal process,” Gates said. “It doesn’t change any situation relative to what we do.”

In his ruling, Jackson dismissed Microsoft’s claims of innocence when he wrote, “It is doubtful Microsoft would have paid (Internet access providers) to induce their subscribers to drop Navigator in favor of Internet Explorer unless it was motivated by a desire to extinguish Navigator.”

The government’s final proposal to Microsoft included rules on what products could be bundled with Microsoft Windows software. It also included rules that would have prevented Microsoft from retaliating against personal computer manufacturers that used something other than Windows on their products or supported competing technology.

Microsoft stood firm on its objection to the idea of providing competitors access to its source code.

Eleventh Hour Settlement Talks

Jackson’s swift ruling came just two days after Judge Richard Posner, mediator of the case, announced that the four-month settlement process had reached an impasse. While Microsoft attributed the stalemate to the Justice Department and the states not working together to reach a solution, several states’ attorneys general said just the opposite was true.

Their contention is that radical disagreements between Microsoft and the government made a settlement impossible.

In fact, several industry insiders attribute Microsoft’s problems to its own corporate greed and an elitist attitude toward the Department of Justice (DOJ) and the states that initiated the legal proceedings. Several weeks ago, some of the states involved in the suits were pushing for a verdict rather than a settlement.

Some analysts who have followed the case closely since the beginning believe that Microsoft could have avoided much of these proceedings had it offered computer makers a predictable, nondiscriminatory price for its Windows operating system. Such a move would have ensured that Microsoft would not be able to use its monopoly to financially punish companies that did not do what it wanted them to do.

To compound Microsoft’s unwillingness to bend, its last ditch settlement offer, proposed on Friday, March 24th, was so complex that the Justice Department had trouble deciphering it. Critics said it was Microsoft’s attempt to further confuse the government about its software.

European Case Still To Come

In advance of Monday’s ruling, the European Commission said it would be unmoved by any American decision and that its own investigation into Microsoft’s alleged antitrust violations will proceed as planned.

EU Commission member Mario Monti expects the Commission to reveal its reaction to the verdict Tuesday, noting that it has its own issues to contend with regarding Microsoft’s business practices.