Microsoft: the lighting of the long fuse

1999-11-24

The brewing legal storm for Microsoft has remarkable similarities to that already experienced by the tobacco industry. Class action suits have already been filed in Alabama, Louisiana, California and Ohio and there is every chance that more will follow. The probability is that the different cases will be consolidated, suggesting another legal battle which will cause more than a few headaches to the software giant.

There are two main differences with the tobacco industry, neither of which are good news for Microsoft. The first is that the defendant is a single company rather than an industry – yes, individual companies were targeted but this still led to a dilution of the overall thrust. The second is that there are no vested interests relative to the tobacco debate, which pitched smokers against non-smokers as much as individuals against companies. In the Microsoft case, the situation is much simpler – individuals and organisations want some of their money back as they feel that they have been overcharged. This isn’t about proving risks to health or substantiating research, this question has a yes-no answer which many feel has already been addressed by Judge Jackson.

Clearly a huge amount hinges on the final conclusions of the antitrust case, which may not be known until next year. Should the parties decide to settle then a final answer may not be reached, meaning that the class action suits will have to start virtually from scratch. In the meantime, investors are hanging on as long as possible to what is clearly a good earner, monopoly or no. It could be argued that settlement acts only in the interests of Microsoft as it does not resolve the fundamental issues of the case. Should the Judge reach a final ruling then Microsoft will appeal, taking the case to the Supreme Court if necessary. In the meantime, both the company and its investors can continue to milk the cash cow.

It is unlikely that other legal disputes will be able to reach any conclusion prior to the closure of the antitrust case. US lawyers are stunningly persistent when they smell money, however, and Microsoft cannot shake off the powerful scent. Legal organisations will try every possible approach to getting their clients’ hands on the cash: it may take several years but sooner or later, like with the tobacco suits, a case will succeed. Once the breach is opened, investors will hang on as long as they dare before they take the money and run.

(First published 24 November 1999)