On May 18, 1998, the Department of Justice filed an antitrust suit against software giant Microsoft in the District Court for the District of Columbia. The complaint alleged that Microsoft’s “Windows” program dominated the market for “Operating Systems,” and that Microsoft used its dominance in that market (and control over the “Windows” program) to destroy competition in markets for other software.

For example, the government claimed that Microsoft had engaged in anticompetitive conduct directed at Netscape, which made Internet viewing software that competed with Microsoft’s own product (Explorer). After a trial, Judge Thomas Penfield Jackson ruled that Microsoft had violated the antitrust laws.

He further ruled that, as a remedy, Microsoft should be broken into two separate companies—one to make the operating system (Windows), and the other to make the software programs that operate using Windows. Sitting en banc, the Court of Appeals issued a unanimous 125-page opinion that affirmed in part and reversed in part. It upheld Judge Jackson’s ruling that Microsoft used illegal conduct to maintain a monopoly in the operating system market. But it disagreed with other rulings, and found procedural errors in the District Court’s choice of remedies.

The Court of Appeals remanded the case to the District Court to conduct further hearings and “fashion an appropriate remedy” that was “tailored” to the Microsoft’s conduct. The case was reassigned to Judge Kollar-Kotelly, who approved a settlement that imposed some oversight and disclosure obligations on Microsoft, but that did not require the company to be broken up. The Court of Appeals unanimously approved the settlement.

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