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Can’t Buy Me Love – Microsoft Antitrust Ruling

In an ironic Valentine’s Day present, U.S. District Judge Stanley Sporkin on February 14th rejected an agreement made between Microsoft and the U.S. Justice Department regarding charges that Microsoft licensing practices stifle competition. The dispute primarily involves how Microsoft licenses operating systems to personal computer manufacturers, including restrictive arrangements that allegedly exclude other operating systems and that may require manufacturers to pay a per-unit fee to Microsoft even on computers that do not contain Microsoft software. Additionally, Microsoft’s proposed licensing arrangements for Windows 95, due to be released later this year, have drawn sharp criticism from computer manufacturers, who admit they have little choice but to agree to terms Microsoft dictates.

Microsoft had reached an agreement with the Justice Department to change the way it licenses its products to personal computer manufacturers. However, Judge Sporkin rejected the agreement on the grounds it did not constitute an effective antitrust remedy and that it failed to adequately address Microsoft’s past and future monopolistic practices. In Judge Sporkin’s words, "simply telling a defendant to go forth and sin no more does little or nothing to address the unfair advantage it has already gained." In strong language, Judge Sporkin also characterized the agreement as "too little, too late."

The Justice Department has decided to appeal Judge Sporkin’s ruling, and U.S. Attorney General Janet Reno defended the original agreement, saying that the judge is going beyond his legal authority by examining Microsoft business practices not alleged in the original complaint. Not surprisingly, within a few hours Microsoft announced it would join the Justice Department’s appeal of the ruling.

Although the proposed $1.5 billion Microsoft/Intuit merger (see TidBITS-248) is a completely separate case being examined by the Justice Department, Intuit’s stock price fell when Judge Sporkin’s ruling was announced last week.

The direct implications of this ruling on the Macintosh community are comparatively slight, since the case primarily concerns Microsoft’s DOS and Windows licensing. However, as Apple licenses the Macintosh and its operating system to third parties, it might take care to notice where Microsoft is allocating its legal budget. Ironically, an argument could be made that a successful appeal of Judge Sporkin’s decision could be financially advantageous for Apple in the future, particularly if the Mac clone market takes off. Since a successful Macintosh clone market will eat into Apple’s hardware business, a legal precedent for restrictive OS licensing practices might allow Apple to earn back some of that money in the form of licensing fees if the clone market proves viable.

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