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The Courts Government News

Iowa Court May Order Microsoft Refunds 319

Posted by timothy from the prime-winners-are-the-lawyers dept.
dowobeha writes: "The Des Moines Register is reporting that thousands of Windows 98 users in Iowa could get $40 refunds from Microsoft. The Iowa Supreme Court has found the big boys from Redmond guilty of price fixing in violation of a 1976 Iowa law. According to the report, this is the first antitrust ruling in any state that favors 'indirect purchasers' (regular consumers who got Windows preinstalled on their newly purchased computer) rather than "direct purchasers" (manufacturers who license Windows to distribute on new machines)."
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Iowa Court May Order Microsoft Refunds More

Iowa Court May Order Microsoft Refunds

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  • Maybe this is a small consolation for living there to begin with.

  • Of course... (Score:3, Funny)

    by gergi ( 220700 ) on Thursday June 13, 2002 @04:27PM (#3696585)
    Since there are only about 3 computers in Iowa to being with, this isn't going to hurt Microsoft too much... :)

    Laugh

  • Consumers, not states, brought the case (Score:5, Interesting)

    by baronben ( 322394 ) <<ben.spigel> <at> <gmail.com>> on Thursday June 13, 2002 @04:27PM (#3696593) Homepage
    Its interesting that in this case, it was consumners, the artical mentiones a vending company and various other consumers that sued microsoft for price fixing, and not the states suing microsoft for anti-trust violations. This might be an interesting route to go if the State's case somehow gets dismissed or otherwised redered void.

    It would be interesting to see how this would work in other states, but it would be difficult seeing as the case was based on state, not federal, law.

    • Re:Consumers, not states, brought the case (Score:4, Insightful)

      by Clay Mitchell ( 43630 ) on Thursday June 13, 2002 @04:31PM (#3696625) Homepage
      Hey, this is good! Instead of the the big corporations petitioning the government to screw Joe Citizen, Joe Citizen petitions the government to hose the corporation! I like this!

      But there's a good lesson here, don't sit back and take it - it's easy to sit around and think academically "oh my, they certainly can't take away this! It's guaranteed in the bill of rights!" but who actually gets out there and tries to stop it?
  • The consumers say Microsoft unlawfully and willfully maintained a monopoly that artificially drove up the price of Windows 98. The company violated the state's 1976 Competition Law, the plaintiffs allege. That law says monopolies are illegal because they exclude competition and fix prices.

    Perhaps other states will follow suit, or is this false hope?

    • Perhaps other states will follow suit, or is this false hope?

      Only other states that have a similar competition law would be able to do this. Consumers in idaho were able to sue only because of the 1976 Competition Law.

      However, if more strong antitrust sanctions against Microsoft are not gained at the federal level, I wouldn't be surprised if dissenting states decide to create special laws to handle such cases in the future.

  • Bloody hell, I knew I should have moved to Iowa! Dang it!

  • Wow.... (Score:5, Funny)

    by NanoGator ( 522640 ) on Thursday June 13, 2002 @04:30PM (#3696614) Homepage Journal
    ... Just wait until Windows 2000 is released over there.
  • Aren't sales from MS to Iowa residents interstate commerce and thus a matter for Federal antitrust law?

    More details would be hepful; I can't help wondering if that story didn't simplify to the point of dropping some key point of the suit.

    IANALBTISANAY

    • Re:um, yeah, but... (Score:3, Insightful)

      by bberg ( 516819 )
      I'm no lawyer... but the point of sale was in iowa, so a company would have to follow state laws also. Just becuase they are based out of stated doesn't mean they are above state law when selling to resedents (of course the internet is the big gray area right now). Its like a fast food joint having to follow local health standards even though they are based out of state. (I know there are allot of holes in this analogy, but take it for what it is worth)

    • Yes, But That In No Way Supercedes State Law (Score:5, Informative)

      by FreeUser ( 11483 ) on Thursday June 13, 2002 @04:52PM (#3696834)
      Aren't sales from MS to Iowa residents interstate commerce and thus a matter for Federal antitrust law?

      Yes, they are. They are also subject to state law where they sell their products. Being an interstate transaction adds federal jurisdiction to an already existing state jurisdiction, it does not in any way negate the state's jurisdiction.

      In other words, it adds regulations Microsoft must follow, it doesn't supercede any. Just as California emissions standards apply to automobiles built in Detroit (but sold in California), so to Iowa's antitrust regulations apply to Microsoft's sales in Iowa, regardless of where Micrsoft is headquartered, or the floppies and CDs their shabby OS is distributed on happen to have been printed.
      • yes, but in that example the car dealer buys the car and then sells to a consumer... the sale to the consumer is where the law is applied.

        in these OEM cases, the computer dealer bought the software, then sold a computer.... they didn't sell or charge a set price for the OS, they just added it into their computer price.

        this isn't cut and dry and because i'm not from iowa, and i would probably be hurt by this law if I was, i don't care much about this case.
        • yes, but in that example the car dealer buys the car and then sells to a consumer... the sale to the consumer is where the law is applied.

          That makes absolutely no difference. Iowa (or any state) has the right to impose regulations on anything sold within their boundries, whether the seller is a resident of the state or not. Iowa cannot regulate widgets going from Nebraska and being sold in Illinois which are just passing through, but if the widgets are being sold in Iowa they can impose whatever (constitutional) regulations they like, whether the manufacturer is in Iowa, Nebraska, Washington State, or Timbuktu.

          It is very clear cut, and, once again, Microsoft is in the wrong.
      • Right. I think what the original poster may have been thinking of was, if a truck full of software drives through Montana on its way from Washington to Iowa, the state of Montana cannot interfere in interstate commerce. Iowa, Washington and the federal government can, and here Iowa is.

  • Cheapskates. (Score:3, Funny)

    by Procrasturbator ( 585082 ) on Thursday June 13, 2002 @04:34PM (#3696663)
    Sure, that pays for your purchase of Windows 98, but where's the compensation for mental scarring?
  • Microsoft responded that the Iowa lawsuit went against federal law, which says only "direct purchasers," such as computer makers who buy Windows 98 from Microsoft, can recover damages for antitrust violations.

    Hmph...and then I guess it's up to these **direct purchasers** to ensure that the money trickles down to the consumers that are immediately affected by the anti-trust violations. Shows you were everyone's priorities lie, hm?

  • Is Iowa the only one? (Score:2, Interesting)

    by S810 ( 168676 )
    Just curious if Iowa is the only state with this law?

  • here we go with the Iowa jokes... (Score:4, Informative)

    by Anonymous Coward on Thursday June 13, 2002 @04:45PM (#3696766)
    Before we start on the "I didn't know there were any computers in Iowa..." jokes- let's remember- the digital computer was INVENTED in Iowa- at Iowa State University!
    • But Al Gore lives in Tennessee!
    • That's not entirely accurate. I beleive that ENIAC [arl.mil] was the first digital computer, but it used base-10 logic instead of binary. The ABC [iastate.edu] was the first binary computer, and it was built at Iowa State University. A court case later on (1973) decided that the patent for the electronic computer went to Iowa State because it was more like the computers that were being developed.
    • I doubt Babbage was anywhere near Iowa when he invented the digital computer.

      Now, unless I'm misinformed (wouldn't be the first time), the University of Pennsylvania made the ENIAC [arl.mil] as the first electronic digital computer.

      So what computer is it that you are referring to?

    • Hey, come on. Remember, Gateway's original ads ran... "COMPUTERS FROM IOWA??????"
    • ...to attempt to divert the energy flow from an onslaught of anti-Iowa jokes to a flamewar about which was the first digital computer. (dollars to doughnuts someone will drag something out of Britain).

      Of course, the correct response to your post is something like "Well, of course they invented the digital computer there--what else wsaa there to do?".

    • You're all wrong (Score:5, Informative)

      by gidds ( 56397 ) <[ku.em.sddig] [ta] [todhsals]> on Thursday June 13, 2002 @09:02PM (#3698328) Homepage
      As has been said, the first digital computer was Charles Babbage's Analytical Engine, though his design was never fully built (partly because the mechanical engineering of the day wasn't up to the job, and partly because the government stopped funding him).

      As for the first electronic digital computer, that wasn't ENIAC, either. I know you USAns like to think that you invented everything, but Colossus [bletchleypark.org.uk] here in the UK beat you by a few years.

      The first binary electronic digital computer was German: Konrad Zuse [vt.edu]'s Z1 [epemag.com].

      And ENIAC wasn't even the first stored-program electronic computer: while ENIAC had to be programmed by plugboard, the Manchester Mark 1 [computer50.org], aka `Baby', was storing programs in memory along with data, just as all current machines do.

      Credit where it's due, please :)

  • Iowa and Political Power (Score:5, Interesting)

    by namespan ( 225296 ) <namespan.elitemail@org> on Thursday June 13, 2002 @04:47PM (#3696782) Journal
    Iowa is an interesting state. It's got a relatively small population, which at one point was even the fastest shrinking population of any state in the US -- this in a time of urban sprawl and growth mentality. This could have made it politically marginal, but by cleverly arranging early caucuses there, they're suddenly important.

    One wonders if this isn't another realization of the power of precedent setting, and perhaps a manifestation of that rumored Midwestern common sense. :)

    • Re:Iowa and Political Power (Score:5, Funny)

      by BigZaphod ( 12942 ) on Thursday June 13, 2002 @04:48PM (#3696789) Homepage
      Oh crap, our secret is out. Expect a visit from the black-tractors....

      • Okay, now THAT is funny.

        I can see this fleet of black John Deere's rumbling down the road at 20mph, followed by a low-noise "stealth" crop duster. Men in black suits with matching John Deere baseball-caps pushed way up high on their heads in the driver's seats.

  • The check is not in the mail. (Score:5, Insightful)

    by n0ano ( 148272 ) <n0ano@arrl.net> on Thursday June 13, 2002 @04:50PM (#3696812) Homepage
    Assuming that MicroSoft actually winds up owing every one is the class $40, a big if, I wouldn't hold my breath waiting for a check. What do you want to bet that the payout will be in the form of a $40 rebate on your next MS purchase?


    I love the US class action legal system. The lawyers get paid big bucks and the consumers wind up funding a new marketing program that locks them in even tighter to the guilty party!

    • More like, after the lawyers get their cut, everybody gets a $10 discount on their next Microsoft purchase and a free copy of Bob XP.
    • "I love the US class action legal system. The lawyers get paid big bucks and the consumers wind up funding a new marketing program that locks them in even tighter to the guilty party!"

      The fee system for class-actions is certainly in need of reform. But until that happens, the people involved in class-action lawsuits need to be as aware as possible of what's going on, and reject settlements that don't help them or remedy the problem.

      One-client situations work quite well, because a single client simply isn't going to settle for anything other than cash except in rare circumstances, and if he doesn't like the settlement, the lawyer can't force him to take it. But since class-action suits are so unwieldy, and it's very difficult to get enough of the parties to agree, the plaintiff's lawyer and the defendants now hold much more power than in your typical one-client case.

      Well, here's hoping that the class-action plaintiffs stick to their guns.

    • Really, it's rare that the consumer gets more than a few bucks in their pocket (I've had some from comcast) but as long as the company being sued views it as a spank, then you have to console yourself with that.

      In terms of the sprint spectrum- there was issue that they were pushing the spectrum but planning a new network (Sprint PCS) that was NOT compatible... I was excited to hear about the suit (I had a spectrum (not the sinclair, dummy!)) phone and thought this would be cool-

      it turns out the "settlement"- a couple of bucks off getting sprint PCS service was worse than the special they had going on at radioshack at the time!!

      The lawyers response? "This was the best we could do. Now excuse me I have this fat check to cash..."

      Thank god I married a (soon to be) lawyer...
    • Actually the consumer will get a $5 rebate coupon. The lawyers will get $35 in cash... per person.

      Figure there is 500,000 people in Iowa who bought Win98, it'll cost Microsoft $20 million, of which the lawyers will collect about $18 million.

      Suing big companies is good business. :-)

  • How Anit-Trust laws let M$ into console gaming (Score:3, Informative)

    by dr_funk ( 7465 ) on Thursday June 13, 2002 @04:52PM (#3696836) Homepage
    I remember back when I was a small tyke that Nintendo was acused of price fixing on their NES consoles. Alot of people will think "Price-fixing in consoles???" But they don't remember the days when it was just Nintendo (The Atari was old and not not a serious compeditor) and there was no competition. Nintendo was free to do as they like and they forced retailers to keep prices artifically high so smaller retailers could be forced to buy @ higher prices.*
    Well, Nintendo got busted and as part of a setlement they agreed to a rebate offer for any customer. You called an 800 number and they sent you a $15 dollar cupon for your next game purchace. They also were forbidden to do this again and were watched closely. Microsoft wouldn't even have a crack to slide the X-Box into if Nintendo still kept an iron glove on the retailers.
    Now days Microsoft is doing things along similar lines and using extra tactics to keep their product monoply. Imagine if Nintendo had never been busted, and did not allow retailers to sell other videogame consoles. They might have been able to keep their monoply and we would have the N64 selling for $300 today.
    If I got any of this wrong then post a correction as I was quite young when this happened and I'm suprised that I could grasp the concept of price fixing enough to remember it all these years later.

    * If you have a product with a MSRP of $100, you may sell it to Wal-Mart @ $50 and to smaller stores @ $75. Wallmart could then turn around and sell the product @ the $75 that the smaller stores are paying and the small guys would never be able to keep up. When you make Walmart sell it @ a higher price to keep business of the smaller guys, you are price-fixing. This is illegal.

  • Gleeful BUT (Score:3, Insightful)

    by 4of12 ( 97621 ) on Thursday June 13, 2002 @04:53PM (#3696837) Homepage Journal

    I applaud the notion that a company responsible for price fixing be made to pay for its noncompetitive tactics.

    That said, however, I see where this could open up all kinds of cans of worms.

    What if it could be shown that the supplier for one part of my Ford Mustang exerted similar tactics and caused the price of some component to be exagerated compared to what a competitive marketplace would support?

    Could I get a refund of several dollars from the manufacturer of the power seats?

    What about going back two levels of suppliers?

    Iowa might be right -- and it might even work -- but on a state by state basis I could see where the feds would get all kinds of complaints from businesses seeking to avoid this kind of potential hassle.

    OTOH, if the feds did their job, looking out for development of anti-competitive marketplaces, then we wouldn't be in this mess in the first place. Maybe there's been a de facto rollback of the Sherman anti-trust act that I don't know about.

    • What if it could be shown that there is an industry that takes a product worth $0.25 in physical cost and packaging, maybe $2.50 in IP value, and then sells the product for $15.00? Then you find that while there are several large makers of this product who would ordinarily be in competition driving prices down, they apparently "agree" on the $15 price, since because of the IP issues they don't really compete directly. Oh, they funnel a goodly share of the profit into "advertising", making sure that their products are the ones that get air time.

      Naaah, too unlikely that such a thing could ever happen.

  • Sweet (Score:3, Funny)

    by TheKubrix ( 585297 ) on Thursday June 13, 2002 @04:57PM (#3696876) Homepage
    kewl, now I can finally get that microsoft optical mouse I've wanted......oh wait

  • It wasn't a decision to force a refund (Score:5, Insightful)

    by jmcnamera ( 519408 ) on Thursday June 13, 2002 @04:57PM (#3696882) Homepage
    Read the article again, this is the Iowa State Supreme court telling the local court to hear the case.

    It wasn't decided if it was anti-trust or that a refund was due. Only that it should be heard.
  • How could the Iowa state court system enforce this decision? Unless Microsoft has a business outlet in Iowa (which I dont think they do), through what means would the state of Iowa be able to make Microsoft pay? Seems like a temptest in a teapot then, because Microsoft is not bound by the laws of Iowa.
    • There's a line in the consitution that requires states to give "due weight" to the legal actions of other states. Ergo, if I'm married/divorced/sued/imprisoned in one state, I can't escape that marriage/divorce/judgement/jail term simply by fleeing the state.

      This little bit of the law is why there was all that fuss about Hawaii possibly allowing same-gender marriages a few years back. If they had did it then, then homosexuals could become married *all over the country* by having their marriage in the rather romantic state of Hawaii.

      MS can appeal the Iowa decision through Iowa's courts, and then through the federal courts, and they might even file suit in Washington court to block it, but simply being in a different state isn't going to let them get out of whatever Iowa demands.

      (And if MS doesn't do anything, they'd get smacked pretty hard. If I filed suit against MS, properly notified them, and they didn't respond, I'd get whatever I could convince the judge was fair for the wrong committed against me.)
  • According to this [iastate.edu]the population of Iowa is 2,923,179 residents. Assuming each person has 1 legally-purchased copy of Win98, $40 to each person winds up costing Billy-Boy $116,927,160. Which is approximately 0.29% of M$'s $40 Billion cashpile. A very insignificant amount in the grand scheme of things for Redmond.

  • How I avoided the Micro$oft Tax (Score:4, Insightful)

    by bnavarro ( 172692 ) on Thursday June 13, 2002 @05:20PM (#3697023)
    I just purchased a Pentium 4 screamer for myself. Since I was converting my old Pentium II compuuter to a Lunx box, I wanted to use the copy of Windows 2000 that I had running on it on my new computer -- I refuse to "upgrade" to XP. I was mindful of getting slapped with the OS tax if I refused a copy of XP. My solution?

    I built the damn thing myself.

    I bought the motherboard, video card, and case from CompUSA. I bought the memory, hard drive, DVD drive, skipped the floppy drive, Ethernet card, and sound card from a mom and pop computer store.

    If you have avoided rolling your own computer, I must report that it was extremely intuitive and easy. If you can build Lego models, you can build your own PC.

    Just say no to the MS tax. Build your own computer!

    • Re:How I avoided the Micro$oft Tax (Score:2, Insightful)

      by Anonymous Coward
      Try putting together a laptop with pieces from different comapnies - and try and get it to be under 1" thick - Have fun!!
  • I used to work at MS, and now I work at a Pharmaceutical company. I'll tell you right now that if MS had to go through the rigorous federally mandated red tape that is pretty evident around here, software prices would go through the roof, and no one would ever develop software because it would be WAY to expensive. ~Vlade
  • Does anyone know of a web site that lists all of the fines Microsoft has had to pay. I was thinking about it and the only thing that came to mind was this [slashdot.org] case where Microsoft had to pay 3 million francs and I Imagine they are going to appeal. As far as I know they haven't paid any fines for the current DOJ antitrust case because it's still ongoing. Have they every had to actually write a check? What are the chances of someone in Iowa ever getting a check?

  • Big deal... (Score:2, Flamebait)

    by talks_to_birds ( 2488 )
    Price fixing is pretty much universal these days.

    I defy you to take the ads out of the Sunday paper, and find different prices for the exact same items in ads from Best Buy, Circuit City, CompUSA, or any of the big, mass-market, national consumerist chains.

    They've even stopped bothering with the fiction of charging $xx.95 at one chain, versus $xx.99 at another chain - prices are for the most part identical.

    Where's the competition?

    Where's the "free marketplace" that some apologists like to trumpet?

    There is no such thing.

    t_t_b

    • Where's the competition?

      Ummm... scanning each other's Sunday paper advertisements, so that if they get undercut they can match their competitor's price by next week?
  • I'm probably going to get modded into oblivion for this, but I really want to know... Why is what Microsoft did considered a bad thing?

    When I go to the supermarket I tend to buy the largest package of something that I think my family can consume before it goes bad because prices tend to be better in bulk. I makes a certain amount of sense too. To the producer, a sale of 1 unit package is not worth as much as a packaged sale of 5 units. Of course, this can be messed up, but the general idea still holds.

    Also, I tend to work at a lower hourly rate when I know I'm going to get a project that is 3 times larger than a normal project. I do that, of course, because I'm getting more stable work.

    So how is Microsoft charging less for bulk purchases somehow wrong?
    • This case is not about Microsoft giving price breaks for bulk purchases. The District Court's Findings of Fact [usdoj.gov] speak better than I could about Microsoft's Windows 98 pricing behavior...

      as it relates to OEMs: "In a competitive market, one would expect the price of an older operating system to stay the same or decrease upon the release of a newer, more attractive version. Microsoft, however, was only concerned with inducing OEMs to ship Windows 98 in favor of the older version. It is unlikely that Microsoft would have imposed this price increase if it were genuinely concerned that OEMs might shift their business to another vendor of operating systems or hasten the development of viable alternatives to Windows."

      as it directly relates to consumers: "A Microsoft study from November 1997 reveals that the company could have charged $49 for an upgrade to Windows 98 -- there is no reason to believe that the $49 price would have been unprofitable -- but the study identifies $89 as the revenue-maximizing price. Microsoft thus opted for the higher price."

      This behavior has nothing to do with bulk purchase discounts, but it has everything to do with misuse of monopoly power. That is why the court demonstrated that both resellers and consumer purchasers were harmed by Microsoft's behavior.
  • And hand out coupons for $40 off Micros~1 products, such as WinXp, Office XP, DevStudio...

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