U.S. v. Microsoft

Citation

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (full-text).

Factual Background

In 1991 Microsoft was investigated by the Federal Trade Commission to determine if Microsoft was abusing its monopoly power in the PC operating systems market. The FTC was unable to come to a decision as its investigators were deadlocked in a 2-2 vote, so the investigation was terminated.

In 1993 the Department of Justice opened its own investigation and found that Microsoft had indeed abused its monopoly power over the operating systems market.

In 1994 Microsoft agreed that it would no longer tie the sales of its other products with its Windows operating system, however; in the years that followed this agreement Microsoft argued that its internet browser, Internet Explorer, was not a product but a feature and could be tied to the Windows operating system.

District Court Proceedings

In 1998 Microsoft was sued by the Department of Justice as well as the attorney generals of 20 individual states for violations of the Sherman Antitrust Act by bundling Internet Explorer with Windows. Microsoft CEO Bill Gates was characterized as being evasive and non-responsive, and there was a substantial amount of evidence on behalf of Microsoft that was found to be inaccurate, falsified or intentionally misleading. Judge Jackson found that Microsoft, by bundling its internet browser with its operating system had created a monopoly in violation of sections 1 and 2 of the Sherman Antitrust Act.

In 2000 the court ordered that Microsoft be split into two companies — one that would make the operating system and the other which would make all the other software. Microsoft immediately appealed this decision.

Appellate Court Proceedings

The plaintiffs attempted to have the appeal heard by the U.S. Supreme Court so as to save the time of additional appeals. The Supreme Court would not hear the case and sent it to the D.C. Circuit Court of Appeals to be heard. The court of appeals affirmed part of the lower court's decision and overturned the rest. The court of appeals agreed with Justice Jackson's finding of fact that Microsoft had indeed engaged in abusive monopoly practices but overturned Justice Jackson's finding of law in which he ordered Microsoft to be split. The reason for this reversal was in part because the court of appeals adopted a drastically altered scope of liability and in part because the court found that Justice Jackson had, in violation of the code of conduct for U.S. judges, given biased interviews to the news media while the trial was still going on.

The case was remanded to the lower court and was reassigned to Judge Colleen Kollar-Kotelly, however; after the Department of Justice released a statement that it was no longer seeking the break up of Microsoft, Microsoft decided to draft a settlement proposal that would allow PC manufacturers to adopt non-Microsoft software.

Settlement

In 2001 Microsoft and the Department of Justice agreed to settle the case. The agreement required Microsoft to share its application programming interfaces with third-party companies and appoint a panel of three people who will have full access to Microsoft's systems, records, and source code for five years in order to ensure compliance. This agreement was designed primarily to ensure that there was sufficient oversight in place to prevent Microsoft from engaging in any further illicit behavior that would bar entry to new software companies. Microsoft was not prevented from bundling other software in the future and was not required to change any of its existing code.

Judge Kollar-Kotelly issued a judgement in 2002 accepting the proposed settlement. Nine states did not agree with the settlement but on appeal the court unanimously approved the settlement, and rejected all objections that the sanctions in the settlement agreement were inadequate.