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Judge Rules Microsoft is a Monopoly

Updated:
WASHINGTON (AP) -- A federal judge ruled Friday that Microsoft is a monopoly, a decision that could lead to serious sanctions against
the software empire built by Bill Gates. The decision by U.S. District Judge Thomas Penfield Jackson to apply the monopoly label is a significant setback for Microsoft Corp., as well as a clear recognition of the expansive influence of the software giant, whose Windows products run most of the world's personal computers.

"Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products," the judge wrote.

Still, Friday's action does not necessarily mean the company will lose the case. Federal law generally bans companies from maintaining monopoly power through illegal business practices, but not from achieving their success selling popular products or making shrewd business decisions.

Microsoft issued a statement calling the judge's findings "just one step in an ongoing process, with many more steps remaining. We're confident the American legal system will ultimately support our position and that our actions have benefited consumers."

Assistant Attorney General Joel I. Klein said, "This is a tremendous victory for America's consumers. ... (that) shows once again that in America no person and no company is above the law." A final ruling could come by the end of the year, with any penalties or remedies spelled out next year.

Jackson could order that Microsoft be broken up into smaller companies that would compete against each other. Or he could choose from a range of lesser punishments, such as requiring Microsoft to allow rivals to sell and improve its dominant Windows operating system, or prohibiting the company from interfering with new technology that could threaten Windows.

Appeals are likely to keep the case in court -- and delay any punishments -- for several years. The government, which spent $7 million on the lawsuit and used tens of thousands of pages of e-mail and other documents as evidence, sought to portray Microsoft as the industry bully. Justice Department lawyers said the company illegally used its heft to undermine competing technologies and to discourage support for its rivals.

The lawsuit by the Justice Department and 19 states accused Microsoft of bullying the industry to help maintain its remarkable influence. Jackson timed the release of his decision to come several hours after U.S. financial markets closed for the weekend. An out-of-court settlement is unlikely.

The government previously accused Microsoft of breaking an important related agreement in 1995, and mutual distrust remains. Chairman Bill Gates privately said a few months after that earlier deal that, "We haven't changed our business practices at all," according to trial evidence.

The success of Microsoft, with $19.7 billion in sales this year alone, rarely wavered during the legal assault. Its stock price more than doubled since the lawsuit was filed and its Windows software runs more than 90 percent of computers. Its Web browser -- once considered second-rate -- is now favored by nearly three-fourths of the roughly 200 million people on the Internet.

When Forbes magazine last month listed the 400 richest Americans, three of the top four executives owed their fortunes to Microsoft, including Gates, who turned 44 last week and personally is worth $85 billion. Famous for being personally involved in decisions at Microsoft, Gates avoided appearing as a trial witness. Stephen Houck of the New York attorney general's office, one of two government lawyers who questioned him in a deposition, told the judge Gates was suffering "a lack of intestinal fortitude."

The government resorted to playing nearly eight hours of video excerpts from that deposition, and the judge laughed and shook his head while watching portions. Gates sounded evasive -- at one point he asked a government lawyer to define the word "definition" -- and professed not to remember key events and e-mails.

In court, Microsoft at times suffered the equivalent of a hard-drive crash. With help from two hired experts barely out of college, government lawyer David Boies forced James Allchin, a senior vice president and a top computer scientist, to admit that a video demonstration shown in court was false.

The government suffered its share of problems, too. Its top economics expert, Franklin Fisher, told a surprised Boies that Microsoft hasn't hurt consumers "up to this point."

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