Microsoft’s Breakup Overturned, Antitrust Violation Upheld

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Microsoft has won a major, but mixed victory in its appeal of an order to break up the company based on the companies violation of the Sherman Antitrust Act. That ruling was handed down by Judge Thomas Penfield Jackson last year, and the appeals process began this year. Microsoft has argued that not only was the company innocent, but that Judge Jackson was clearly biased based on statements made to the press while the trial was being held. The U.S. Court of Appeals for the District of Columbia has ruled that Judge Jackson did indeed give the appearance of bias, but upheld that Microsoft had violated the Sherman Antitrust Act. They have sent the case back down to a lower court for a new remedy. According to an AP report:

A federal appeals court unanimously reversed the breakup of Microsoft on Thursday, agreeing with the software maker that the trial judge engaged in "serious judicial misconduct" by making derogatory comments about the company. The U.S. Court of Appeals for the District of Columbia upheld the conclusion that Microsoft violated antitrust laws but ordered that a new judge decide what penalty the company should face.

By a 7-0 vote, the appeals court concluded U.S. District Judge Thomas Penfield Jackson made inappropriate comments to the news media and outside court that gave the appearance he was biased against Microsoft. While reversing the breakup, the court refused to overturn the conclusion that Microsoft acted as an illegal monopoly to gain an unfair advantage over competitors, particularly those with rival Web browser software.

The appeals judges said they agreed "with the District Court that the company behaved anti-competitively ... and that these actions contributed to the maintenance of its monopoly power."

The court also handed Microsoft a smaller victory by reversing one finding by Jackson that its packaging of its Web browser and operating system violated antitrust law. The judges said the government, in the new phase of the trial, would have to show that Microsoft "unreasonably restrained competition" with that action.

The appellate decision that Microsoft may be able to package the products together was reached, the judges said, because they feared that such a prohibition on packaging software may impede operating system innovation." The appeals court said it only reversed Jacksonis penalty decision because, "The most serious judicial misconduct occurred near or during the remedial stage. It is therefore commensurate that our remedy focus on that stage of the case."

Microsoft has so far been mum on the ruling. Microsoftis stock was trading at 72, up 86 cents as of this writing.

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