Microsoft Class Action Settlement Scrutinized

The proposed settlement to over one hundred private suits lodged against Microsoft is expected to come under fire when a Baltimore federal judge holds a public hearing in the case.

Lawyers representing Microsoft and the plaintiffs are set to present their settlement proposal to U.S. District Court Judge J. Frederick Motz at a hearing that started Tuesday morning. No immediate decision is expected, however, as the judge is expected to take time to examine public comment and documents filed by interested parties.

Microsoft and plaintiffs in the case agreed to a deal last Tuesday that would have Microsoft shell out over $1 billion in software, computers, and additional funding to some of the nation's poorest schools in exchange for settling the nationwide suits alleging that the company overcharged for its software. The settlement would not include private lawsuits relating specifically to Windows XP.

Good Recruiting?

Opponents of the settlement claim that rather than punishing Microsoft, the deal would actually benefit the company, however, by allowing it to entrench its wares with a whole new generation of computer users.

One such opponent, Computer and Communications Industry Association President Ed Black, has already sent a letter to the judge in the case, stating his disagreement with the proposed settlement's ability to deter Microsoft from future anticompetitive practices.

"This settlement is letting someone who has legally been identified as a monopolist and (who has) engaged in serious misconduct off the hook," Black said in an interview Tuesday morning. "The fact that this remedy solidifies Microsoft's position as a monopolist is phenomenal and absurd."

Penalty Questioned

Opponents are against the deal's stipulation that Microsoft donate software to schools, partly because they fear that the company will gain a dominance in the still burgeoning market, trouncing embattled competitors like Apple Computer. Also, they claim the monetary damage to the company is significantly reduced by enabling it to give retail products rather than cold, hard cash.

"The fact is that Microsoft has some $33 billion in the bank and net profit of $1 billion a month," said Black. "If they wanted to take $1 billion in cash and distribute it, that's fine, but to do it in software and hardware...is abusive to the market."

Lawyers who proposed the settlement have defended the deal, however, saying that the settlement is not as much about hurting Microsoft as it is about using the plaintiffs' reward to help impoverished schools.

Microsoft rival Red Hat pointed to the apparent discrepancy by making an offer of its own. The Linux vendor said it will donate open-source software to the schools to run on the PCs Microsoft will donate. That way, Microsoft can contribute the money it was going to allot for software to instead purchasing more PCs.

Cara Garretson in Baltimore contributed to this report.