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Microsoft Antitrust Settlement Expires

May 13, 2011

In 1998, the powerhouse known as Microsoft was accused of breaking antitrust law by the US Justice Department. Fast forward 13 years later, and the expiration of the antitrust settlement against the software company passed with little notice on Thursday.

In the 13 years since, Apple has gone from having just a small slice of the PC market to dominating the mobile media market. And Google, barely in existence in 1998, is now the top Internet search and online advertising business in the world.

In a statement released Wednesday by the Justice Department, it said it believes the case that it and 19 state attorneys general brought against Microsoft in 1998 helped open the computer industry to more competition across the technology sector.

Microsoft is still a technology giant with its Windows operating system and Office software, but it is no longer a feared monopoly or top innovator. And now that it has learned antitrust law, Microsoft wants regulators to now focus their attention on Google.

The decision to allow the antitrust judgment to expire was made last month by Judge Colleen Kollar-Kotelly of the US District Court for the District of Columbia.

A federal judge originally ordered Microsoft to be broken up in June 2000, but an appellate court reversed the decision a year later. The DOJ ultimately settled with Microsoft.

Microsoft was required to end retaliation against computer makers who used non-Microsoft software and comply with other antitrust laws. The consent decree was originally planned to last five years but was extended repeatedly.

Despite still having success with its Windows, Outlook and Office software, Microsoft has failed to gain headway in other areas, including its Bing search engine, which remains relatively low in market share.

“It (the legal battle) had an inhibiting affect on it (Microsoft),” Evan Stewart, an antitrust expert at Zuckerman Spaeder LLP, told Reuters reporter Diane Bartz. “They’re not competing effectively with Facebook. They’re not competing effectively with (Apple). They’re not competing effectively with Google.”

But Andrew Gavil, a Microsoft follower who teaches antitrust at Howard University School of Law, argues that the software giant was encouraged to try to illegally hinder rivals because it had slipped behind in the innovation race after underestimating the importance of the Internet.

“Its strategy for catching up was to use its leverage on desktop to hinder its rivals,” Gavil told Reuters. He and other antitrust experts argue that a weak consent decree did little to restrain Microsoft.

“The most obvious bad behavior was stopped. It didn’t restore lost competition. It didn’t do anything to revive the competitors that had been hobbled,” Gavil told Bartz.

Perhaps antitrust regulators made out better than anyone in the Microsoft suit.

“It was extremely welcome to see the Justice Department go after Microsoft and frame an ambitious case against it,” said Jeff Schinder of law firm Constantine Cannon. “It resurrected its finest tradition of going after dominant firms that were squelching competition.”

Despite Microsoft’s efforts to get regulators interested in targeting Google, Bert Foer, head of the American Antitrust Institute think tank, argues that no one company today stands out like Microsoft did in 1998 as an antitrust violator.

Microsoft called Google out questioning the fairness of its website ranking system and has urged website owners to complain to regulators. Microsoft itself made a formal complaint to antitrust regulators in Europe, where Google is already under investigation by the European Commission. Sources said US regulators have recently eyed Google for possible investigation.

Microsoft said it is happy to put the antitrust case behind it. “Our experience has changed us and shaped how we view our responsibility to the industry,” the company said in a statement published by the Associated Press.

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