Applied Economic Consultants

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Case Studies

Opposition to MDL Settlement of All U.S. Microsoft Antitrust Claims

Antitrust, liability, causation, damages, and class certification for plaintiffs
U.S. District Court for the District of Maryland

applEcon was finishing a damages study for class action plaintiffs in an antitrust suit against Microsoft in California state court when an attempt was made to highjack the case.  Microsoft and multi-district litigation (MDL) plaintiffs’ attorneys proposed a settlement of all U.S. antitrust claims in federal court.  In less than a month, our expert created a 75-page report that served as the factual basis relied upon by the judge in denying the proposed settlement.  Our clients successfully pursued their suit in California state court, and subsequently in six other state courts [insert link to Lingo or MS state class action case study].

The proposed settlement would have made refurbished computers, software, support, and training available to impoverished schools.  The effect would have been anticompetitive:  Apple educational software would have been required to compete against free Microsoft software; the PC hardware platform, too, would have received favorable treatment.

Sadly, the proposed settlement would not have worked for the schools that it was supposed to help.  Impoverished schools would have been glutted with five times as many copies of a single science title as real-world educators used of all science titles.  And because the proposed settlement would have funded only about 9% of the total cost of operation of the proposal, schools would have had to double their spending on technology to make effective use of the proposed settlement.  It was a gift impoverished schools could not afford.

Less than a month after first receiving notice of the settlement proposal, and just six days after receiving the final proposal, our witness testified at the settlement hearing.  Simply correcting for such obvious errors as the use of list prices rather than market prices halved the value of the proposal.  A math error we caught during the hearing (and acknowledged on the stand by the opposing expert economist) further reduced the value of the settlement to one fifth that claimed by Microsoft and MDL.  But even the entire $1.5 billion claimed by Microsoft and MDL as the nationwide value of the settlement fell far short of damages:  the proposed settlement was only 4% of applEcon’s estimate of damages to our client’s California plaintiffs, who ultimately received a settlement worth $1.1 in their jurisdiction alone.