Microsoft last night agreed to pay AOL Time Warner $750-million to settle clams that the software firm unfairly used its dominance in the market to crush competition.
The agreement resolves a suit brought in January 2002 alleging that Microsoft had used anti-competitive practices to promote its Internet Explorer browser over AOL’s Netscape browser.
The suit was one of several launched on the back of Microsoft’s settlement of the long running anti-trust case brought by the federal government and a number of US states. AOL had argued in the lawsuit that Microsoft made deals with computer manufacturers stretching back to 1995 to shut Netscape out.
An outstanding case against Microsoft by Sun Microsystems seeking $1-billion in damages is expected to go to court at some point in the next year.
The agreement represents a thawing of the relationship between AOL and Microsoft, which are respectively the single biggest and most influential companies in media and software. In addition to the settlement, the two agreed to a series of collaborative measures designed to accelerate the use of digital media.
AOL bought Netscape for $9,8-billion in 1999 but has never used it as the browser in its AOL service provider. Since then, its market share has slipped further and its future is uncertain.
Richard Parsons, AOL chief executive, said AOL would not get rid of Netscape ”at this point”.
Shares in the company were 3% higher in after hours trade. Bill Gates, Microsoft chairman, said: ”A lot has changed in the last few years, not only in the marketplace but also for Microsoft and AOL Time Warner. We’re pleased to reach this new agreement that’s forward looking and provides for a higher level of technical co-operation. Litigation is not the best way to use resources or executive time.”
The companies intend to work together on the development of technology and digital media distribution to give consumers better access to content such as music, videos and news. The two will make their instant messaging systems compatible and Microsoft has agreed to a long-term license of digital rights software to AOL, designed to prevent piracy.
Microsoft will also provide technical information on its Windows operating system and will licence its browsing technology to AOL’s internet service provider for free over the next seven years.
Parsons said: ”Bill gave me a call six to eight weeks ago and we started to talk about whether there might be an opportunity to do something good for our companies and for consumers, and we took it.”
AOL will use the proceeds from the settlement to reduce its debts, currently sitting at around $24-billion.
Microsoft reached a landmark settlement of its long and acrimonious case with the American justice department and 17 states last year.
But it is still not free of litigation. Two states, Massachusetts and West Virginia, are still pressing for tougher sanctions. – Guardian Unlimited Â