California Consumers Settle MS Antitrust Suit

lseltzer writes "According to AP, $1.1B in Microsoft products will go to California consumers to settle antitrust claims against the company. I bet the lawyers don't get paid in software." Actually, the article says that those who apply for some of the settlement will receive "vouchers redeemable for any manufacturer's computer-related products and software."

Comments

MS always come up with SLAP in your face solution

[oktokie]

I am not sure if the Windows ME and Windows NT which came with my desktop and server is refundable...
I am pretty sure that most of their money is made on their crappy OS which I was forced to pay when I purchased my hardware to run BeOS and Linux...

They have so much money so, $1.1 Billion dollar penalty is a drop in the bucket. Let say that parking ticket in the town was $30 per violation.
If illegal parking brings $110 profit because there were no other competitors which knows town officials well enough..and had money to pay off violation.. they still make $80 profit... as long as they make profit...they will ignore the rules and regulations which normal businesses are bound to...

This is really sad...

Well... now we have a tax cut for riches to worry about.

give the vouchers to the state

[Petrox]

Microsoft had initially hoped to donate this amount in-kind to schools, right? In other words, Microsoft had wanted to donate this amount in software and other Microsoft products. Ostensibly, the schools were to receive the benefit. The problem from the perspective on many individuals and competitors (such as Apple) was that this would allow Microsoft to extend its monopoly into a market it didn't already have a monopoly in.

Today, we have this settlement, which allows consumers to claim a voucher. We also have a request by California Gov. Davis to cut funding to social services and education, as well as to increase state income taxes. Consumers should be allowed to settle their increased tax bill by handing over their settlement voucher to the California government, in exchange for a guarantee that the voucher would be used to purchase computer technology equipment and other educational resources for state schools. Perhaps also the California government should be awarded any unclaimed consumer vouchers after a certain (short) settlement period. This way, schools would be able to purchase whatever resources best fit their needs (instead of having free Microsoft products handed to them), and some of the sting of the increased taxes could be reduced.

Just a thought...

I'm not an accountant

[joeflies]

but is the reason for doing these deals is that it gives Microsoft a tax break? Can't microsoft write off product/licenses given away (as compared to withdrawing the equivalent cash out of the revenue stream)?

I'm just trying to get a grasp on what the real financial impact is here (and whether if it is really a penalty)

Re:I'm not an accountant

[jsse]

Definintely. Microsoft could find a way to write it off as a tax donation, and they could actually cash in profit in the long run in future licensing/upgrading deals.

However, this is not the worst part of this settlement. Apple's big stake in the educational market could be jeopardized by Microsoft pouring in millions of dollars of free software.. The sounds crazy, the settlement is doing exactly the thing that Micosoft was being sued for.

Where is justice?

Re:actually

[Anonymous Coward]

In .au this would be illegal. Show us the cash
Since the 1800's paying workers in product/goods is illegal.
It is like prostitutes paying their police fines with 'services'.
Mucking around with PV and INTEREST, it sounds like a trick the British in Boston would do, except this time round California is royaly duped.

Just curious here ...

[SuperDuG]

If Microsoft were ordered by the court to give $12 Billion dollars to Netscape, Linux (good luck), OS/2, BeOS, or whomever else they stomped on, would that be acceptable?

How about if the entire microsoft headquarters was set ablaze and all the states attorney generals got to roast marshmallows on the remains? Of course not we all would think that was "unfair".

BUT MS having to give 1.2 billion dollars to the people of California, that's just not good enough.

So here's the question for all of you who think that this "isn't enough". What is enough? I'm meerly trying to spark discussion here, not put anyone down. I would really like to know what people think should be the punishment of microsoft.

Weigh in the amount of damage they've done, business lost and lives lost. Information stifled to just being at the right place at the right time. Explotation of the weak, or creating a market where there was none. I really want to know what the slashdot community thinks.

Re:Just curious here ...

[jimhill]

Well, I'd reject this agreement if I were the judge who had to approval responsibility. Before explaining why, let me kick out some facts/numbers/minor assumptions.

0) Microsoft admits no wrongdoing in the settlement.

1) Microsoft isn't paying a $1.1B fine. It is issuing vouchers for _up to_ $1.1B in products, whether hardware or software, whether Microsoft's or someone else's.

2) The redemption rate on vouchers and coupons and rebates is historically very low. Everyone knows this; it's why manufacturers will include $50 rebate coupons in their products rather than just knocking $50 off the price. The lower the rebate, the lower the redemption rate. With the vouchers in this settlement being $29 for Excel or Office, $16 for Windows, and $5 for Word, an awful lot of people won't bother, especially since they won't be getting a check, they'll be getting a discount which means "you gotta spend money to save money" at a time when the economy's tight. Let's say Microsoft ends up issuing half a billion dollars' worth of these vouchers (which I think is way optimistic). There are two immediate consequences of that.

3a) Of the $500M issued to private claimants, 80% or so will go to businesses (assuming equal breakdown of claims to sales; the SJMerc reports businesses were responsible for 80% of MS sales in California). Whether through preferring to go with the 'standard' or through an honest belief that One Microsoft Way is more than an address, these businesses have made the decision to use Microsoft software and the hardware than runs it -- including some sold by Microsoft. It is reasonable to expect these businesses to redeem their vouchers on More Of The Same. They'll be using these vouchers to expand the use of Microsoft products. So long as they choose software, the cost to Microsoft falls effectively to zero. The same applies to the $100M issued to private citizens, although their claim rate is likely to be higher because of disgruntled Microsoft-haters who make sure to buy a Logitech mouse with the voucher from their Windows tax.

3a) The remaining fraction, $600M, is one-third kept by Microsoft (saving $200M off the top) and two-thirds (that's $400M, if you're bad at math) donated as vouchers to schools. They will likely do with those vouchers what private claimants do; namely, turn them into more Microsoft products. Again, much of that will be software, making Microsoft's effective price zero.

That means that of the Whopping, Staggering One Point One Billion Dollar Agreement, Microsoft will probably lose one-two hundred million in income due to the cash value of the vouchers. A company that size can afford that without a hitch, esp. since the income spike caused by voucher redemption (using your $16 coupon to buy a $200 XBox means another $184 for Microsoft plus future licensing fees on the games you'll buy) and the tax benefits of having to absorb a "$900M" court settlement will offset voucher value so it will almost certainly end up seeing a pretty sweet bump to its bottom line, plus the warm fuzzies many people will feel when they see Microsoft write a "$400M check" to those poor public schools.

In short, the agreement is going to help Microsoft immensely. It is going to do _very_ well if the court accepts the agreement.

So here's why I'd reject it: the purpose of the suit was to prove that Microsoft used its monopoly power to overcharge California customers. The purpose of a settlement or penalty is twofold: to make restitution to the overcharged and to dissuade the company from doing it again. I think the settlement would accomplish the first but it fails utterly in the second. The company walks away with increased revenue, improved PR, and no legal record of having broken the law. That is unacceptable to me. See you in court, Counselor.

You asked what _would_ be acceptable. Microsoft pays real money, not vouchers. It pays all the money to the state of California, to ensure that the company's penalty is real and not diminished by the large number of citizens who aren't worked up enough to claim their refunds. California can distribute the funds to claimants and distribute the rest to schools in whatever equitable manner the legislature decides (which would probably means giving $X to the schools, cutting the school budget allocation by $X, and increasing general fund spending by $X -- that's what the states with lotteries to benefit education do). Microsoft pays treble the estimated overcharge (let's call it $3.3B in the manner of the original settlement proposal). Microsoft admits willfully using its monopoly power to overcharge California customers. Microsoft pays all the undoubtedly soaring legal fees associated with the case. Microsoft pays California the cost of administering the refund program. The legal and administrative costs are in addition to the $3.3B penalty, not part of it. That, I could live with.

Re: Software cost

[martin-boundary]

Actually, what would be funny too is if Red Hat did a quick advertizing blitz offering free boxed copies of Red Hat to anyone willing to prove that they bought some hardware with their refund voucher. They could even offer to preinstall the software on selected hardware sellers products. Just an idea.

What about GNU donations?

[egil]

Wouldn't it be appropriate to use as many as possible of these vouchers for a purchase from FSF? Perhaps the FSF could make some sort of micro-edition of Gnu software to be bought for download (i.e. minimal cost for FSF)?

What is enough

[Conspire]

1. Break up company into separate companies (OS, Office, Internet). Separate companies have non conflict of interest and independant boards and management.

2. Disgourge majority of company profits realized over the monopoly period. Disgourged profits used to fund public education (not computer specific education, but math and science education via books and teachers)

3. Open all MS undocumented APIs (both recent and historic), and open all MS file formats. Let the spin off companies keep thier *coughccough* great source code.

4. Rule that all MS spin off companies can not finance any political campaigns or lobby groups. In fact, let's just eliminate soft money in the US altogether from any company!

Those four are starter points of what I think "is enough" for the bit bully of our day.

Re:Software cost

[gilesjuk]

Indeed, it's like when they seize drugs, they always quote the street value. Such drugs cost nothing to produce, the smugglers rely on the limited supply to keep prices high.

Were Microsoft to supply them with $1.1B in cash it would hurt a lot more. Most of these cases were about overpricing, it's odd that they have settled for vouchers for their overpriced software.