Microsoft Victory: Judge Approves Consent Decree

In a 97-page ruling issued late last week, U.S. District Court Judge Colleen Kollar-Kotelly essentially threw out the states' case against Microsoft and gave her stamp of approval to the proposed consent decree Microsoft signed with the U.S. Department of Justice last November.

The court approved the consent decree largely as written yet imposed an additional requirement that would force Microsoft to disclose technical information to competitors months earlier than agreed upon.

"The court is satisfied that the parties have reached a settlement which comports with the public interest," the judge wrote. "Far from an amalgam of scattered rules and regulations, pieced and patched together to restrict Microsoft's anticompetitive business conduct, the proposed, final judgment adopts a clear and consistent philosophy such that the provisions form a tightly woven fabric."

With that, the software giant has averted harsher penalties advocated by the nine state attorneys general who filed the lawsuit late last year, including one that would have required it to make available a stripped-down version of Windows without Internet Explorer.

"A remedy requiring code removal would disregard [an earlier court opinion that it is undesirable for the court to inject itself into matters of product design," the judge wrote.

The ruling is viewed as a big win for Microsoft. Despite the fact that the company was found in violation of both Sections I and II of the Sherman Antitrust Act last year, Microsoft successfully avoided two penalties of most concern: a potential breakup and government intervention in Microsoft's product development efforts.

Industry watchdog ProComp said the settlement sets a dangerous precedent. "The decision accepts the deeply flawed settlement between Microsoft and the DOJ, which does nothing to restore competition to the marketplace or prevent Microsoft from repeating acts explicitly held by the Court of Appeals to have been illegal," said Judge Robert Bork, a former appellate judge and antitrust expert associated with ProComp.

Many in the channel cheered the ruling, however, saying the government has no business dictating corporate product development efforts. They also said Microsoft has complied with the consent decree by making its OEM licensing terms more uniform, releasing hundreds of previously secret APIs and communication protocols and allowing more flexibility for OEMs and end users to display competitors' Internet programs on the Windows XP desktop.

Company backers said the ruling clears the way for Microsoft's .Net plans, ensures the continuance of Windows as the standard PC operating system, simplifies product support for channel partners and OEMs and perhaps removes at least one objection to IT purchasing.

"I don't see any drawbacks [to Microsoft's win," said Chris Cangero, vice president at Epoch Data, a Microsoft Certified Partner and solution provider in New York. "I'll continue to do business with them in the same way I always have."

Most weren't surprised, saying the states' case was a last-ditch effort after the consent decree was signed. They also say Microsoft is untouchable. "Microsoft will elbow its way into the Web services arena regardless of the ruling," said Jim Gildea, president of Aegis Associates, Watertown, Mass. "They're like a juggernaut, like the Borg. Resistance is futile," Gildea said.

"Now that Microsoft has won, I think you'll have a whole new set of antitrust issues in the next three to four years," said David Koretz, CEO of Blue Tie, a Rochester, N.Y.-based ISV.

But at least one partner said the case has improved the competitive landscape. "It has made us more cognizant of the other choices out there, such as Linux," said Brian Okun, vice president of marketing at CHIPS, Lake Success, N.Y.

Jeff O'Heir, Jennifer Hagendorf-Follett, Elizabeth Montalbano, Joe Kovar and Amy Rogers contributed to this story.