Apple CEO blasts MS antitrust settlement

Apple Computer CEO Steve Jobs this week blasted the proposed settlement in

the private antitrust case against Microsoft. Apple and other critics of the

deal say the agreement amounts more to a sales and marketing coup for Microsoft

than punishment for ripping off consumers.

Under the terms of the deal Microsoft has agreed to donate $1 billion in

training, hardware and software to 12,000 American schools in poor districts and

rural communities. But those donations will have the effect of undercutting the

educational sales of Apple Computer and other hardware and software companies

who depend on that market for a significant portion of their sales.

"We're baffled that a settlement imposed against Microsoft for breaking

the law should allow, even encourage, them to unfairly make inroads into

education - one of the few markets left where they don't have monopoly power,''

Jobs said.

Jobs comments end nearly four years of silence after spending much of the

previous two decades criticizing Microsoft and it Windows products. In 1997

Apple received a $150 cash investment from Microsoft and the two companies have

been on relatively friendly terms ever since.

Edward Black, president of the Computer and Communications Industry

Association, said the class-action settlement would in effect allow Microsoft to

extend anticompetitive business practices to the education market. "By

allowing Microsoft to flood the education market with free software at virtually

no cost to the company, the court will be virtually assuring that no other

competitor will be able to charge for its products. The foreclosure of this

market to competition and consumer choice will only facilitate the continuation

of Microsoft's unlawful monopolistic strategy."

The settlement is being reviewed by US District Judge Frederick Motz in

Baltimore. Motz held court hearings this week to hear from educators, lawyers

and technology experts on both sides.

In a set-back for Microsoft and the backers of the settlement, economist

Keith Leffler who helped draft the proposed settlement admitted under

questioning by Motz that he had significantly underestimated the potential

damages caused by Microsoft's monopolistic pricing practices.

Leffler had estimated the damage at about $2.1 billion. But that number was

probably closer to $5 billion, he told the court.

The deal poses a big threat to Apple, which controls about 47 percent of the

K-12 education market. The company filed a brief arguing that the settlement

would only further Microsoft's monopoly power. "If this is a settlement

against harm that occurred in the marketplace the last thing you want the

settlement to do is bring that harm to the one sector where there's been a very

broad choice,'' said Linda Roberts, who directed the Clinton Administration's

educational technology program and now consults for companies including Apple.

Microsoft has argued that schools will be able to decide how they want to

spend the money and could use it to purchase products from competing companies.

But schools who choose Microsoft products will be given more resources, such as

free software.

The opposition to the private antitrust settlement comes just as Microsoft is

also seeing the opposition against the government's antitrust settlement grow.

This week, Connecticut Attorney General Richard Blumenthal, who had held out on

accepting the deal, became the latest official to back away from the proposed

settlement saying the agreement "has too many gaps and ambiguities. The

settlement reflects good progress but not good enough. Among my concerns are the

need for a longer length of time, a stronger enforcement mechanism, and tighter

anti-retaliation and disclosure provisions."