Microsoft antitrust decree ends, Google eyed

By Diane Bartz

WASHINGTON (Reuters) - Microsoft was a giant fending off tiny rivals in 1998 when the U.S. Justice Department accused it of breaking antitrust law.

In the 13 years since, Apple has gone from having a sliver of the personal computer market to dominating the world of mobile media with its iPhone and iPad.

Back then, Google barely existed. It now rules the search advertising market.

Microsoft <MSFT.O> is still a technology titan with its Windows operating system and Office productivity software, but is no longer a feared monopoly or leading edge innovator.

And now that it is schooled in antitrust law, Microsoft wants Google Inc <GOOG.O> to be regulators' next focus.

Microsoft's legal battle, once a distraction to its top executives when they could have been at their most creative, ended on Thursday as court oversight of Microsoft expired with little or no fanfare.

The decision to allow the judgment to expire was made last month by Judge Colleen Kollar-Kotelly of the U.S. District Court for the District of Columbia.

BAD BOYS TO TAME BOYS

Microsoft was already competing with upstart rivals in the early 1990s when the Justice Department accused it of insisting that all personal computers shipped with its Windows operating system be loaded with its web browser Internet Explorer rather than Netscape's Navigator.

A federal judge originally ordered Microsoft to be broken up in June 2000, but an appellate court reversed the decision a year later. The Justice Department ultimately settled with Microsoft.

Under a consent decree it was required to end retaliation against computer makers who use non-Microsoft software and comply with other antitrust law. The consent decree was originally slated to run five years but was extended repeatedly.

Windows and its Outlook email system remain popular but its Bing search engine and other efforts to move into new markets failed to catch fire.

"It (the legal battle) had an inhibiting affect on it (Microsoft)," said Evan Stewart, an antitrust expert at Zuckerman Spaeder LLP. "They're not competing effectively with Facebook. They're not competing effectively with (Apple). They're not competing effectively with Google."

But Andrew Gavil, a Microsoft watcher who teaches antitrust at Howard University School of Law, argues that Microsoft was spurred to try to illegally crush rivals precisely because it had slipped behind the innovation curve after underestimating the importance of the Internet.

"Its strategy for catching up was to use its leverage on desktop to hinder its rivals," said Gavil.

Further, Gavil and other antitrust experts argue that a weak consent decree did little to curtail Microsoft.

"The most obvious bad behavior was stopped. It didn't restore lost competition. It didn't do anything to revive the competitors that had been hobbled," he said.

Microsoft has publicly called into question the fairness of Google's website ranking system and has urged website owners to complain to regulators. It has itself made a formal complaint to antitrust regulators in Europe, where Google is already under investigation by the European Commission. Sources say U.S. regulators are considering an investigation of Google.

"As far as who the successor will be, that will largely be determined by how they behave. I'm talking about Google and Apple <AAPL.O> and maybe Facebook in the high-tech area. You still have market power by IBM <IBM.N> in its field and you still have Microsoft," he said.

Perhaps antitrust regulators made out better than anyone in the Microsoft suit.

"It was extremely welcome to see the Justice Department go after Microsoft and frame an ambitious case against it," said Jeff Schinder of law firm Constantine Cannon. "It resurrected its finest tradition of going after dominant firms that were squelching competition."