By Siobhan Kennedy
A group of lawyers in California yesterday filed a class action suit against Microsoft Corp, alleging that the software giant charged consumers too much for its Windows 95 and 98 operating system software. The suit, filed on Monday and seen by ComputerWire, named two plaintiffs, Lillian Lea (a private resident) and Tortola Restaurants LLP, whom it said were suing Microsoft individually and on behalf of….all others similarly situated in California.
The suit alleges that Microsoft broke the state’s antitrust Cartwright Act by using its monopoly power to charge consumers an inflated price for its Windows 95 and operating system software. As well as seeking damages for themselves, the suit also named all persons who purchased, leased or licensed Windows or Internet Explorer in California, for their own use and not for resale, as part of its case. One estimate puts that number of users at around 10 million Californian residents and businesses.
At the heart of this case is the recent publication of the findings of fact in the Microsoft/DOJ antitrust trial. Judge Jackson found that Microsoft was a monopoly and said that the software giant used its power to squash competitors and cause harm to consumers. One of the class action lawyers, Daniel Mogin, told ComputerWire that under one of his findings, Jackson said there was a differential, of $40, between what he called a competitive price and what Microsoft had chosen to charge for an upgrade to its Windows software which included the Internet Explorer browser. In other words, Microsoft was using its monopoly power to charge $40 more for its software than it would have been worth in a competitive marketplace, he said.
According to William Kovacic, an antitrust professor at George Washington University, under Federal law, only those users who purchase goods directly from a company are entitled to sue if that company is found to use its monopoly to charge more for those products. This poses a problem for consumers when it comes to software because the first, direct purchaser is usually a PC manufacturer, Kovacic said. But under Californian law, he added, indirect users are allowed to sue as well. Around 17 or 18 US states have passed their own antitrust laws which allow consumers to sue on their own, he said, Given today’s class action suit, I would be surprised if we didn’t see more of them.
Specifically, the suit is demanding that each plaintiff recovers three times the damages they have sustained. Theoretically, that means each is entitled to three times $40, but Mogin says the plaintiffs can sue for more. In the filing issued yesterday, both plaintiffs, Lillian Lea and Tortola Restaurants LLP, are suing for a maximum of $75,000 and other users referred to in the suit could do feasibly do the same.
While the three antitrust lawyers, Terry Gross and Francis Scarpulla of San Francisco and Daniel Mogin of San Diego, are acknowledged experts in their fields, Kovacic says they will have a very hard time fighting the case if the DoJ’s trial is settled out of court- and as we reported settlement proceedings began last Friday. Typically, he says, only the judge’s final ruling can be used as evidence in other cases, and so far, the three lawyers only have Jackson’s findings of facts to go on. If the case settles before judge Jackson gets a chance to issue his final judgement, the findings of fact will be worthless as evidence, Kovacic says.
But in the meantime, the findings serve to create a lot of leverage. First for the lawyers, he says, they’ll get to recover their attorney fees if they win and for the plaintiffs it creates a tremendous potential exposure against Microsoft. Even if Microsoft and the DoJ reach a settlement, he says, the lawyers could still use the findings of fact as a roadmap for their own cases. Although they’ll still have to go about proving the fundamental facts, such as Microsoft being a monopoly, Kovacic said. At best, the class action suit becomes another irritant and risk that Microsoft has to consider in deciding whether or not to settle, Kovacic concludes. At worst, it could end up having to write a very big check.á
