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BusinessJanuary 13, 2003

SAN FRANCISCO -- Microsoft has reached a $1.1 billion settlement with consumers in California who accused the software giant of violating the state's antitrust and unfair competition laws. Under the agreement announced Friday, proceeds of the settlement will be distributed in the form of vouchers redeemable for computers and software products...

The Associated Press

SAN FRANCISCO -- Microsoft has reached a $1.1 billion settlement with consumers in California who accused the software giant of violating the state's antitrust and unfair competition laws.

Under the agreement announced Friday, proceeds of the settlement will be distributed in the form of vouchers redeemable for computers and software products.

The settlement stems from a class-action lawsuit filed in 1999 on behalf of California consumers and businesses who bought Microsoft's operating system, productivity suite, spreadsheet or word processing software between February 1995 and December 2001.

Lawyers for both sides said the deal, which must be approved by a judge, could benefit more than 13 million consumers and 3 million children in 4,700 schools.

Similar antitrust class-action lawsuits have been filed in 16 other states.

"California represented by far the largest number of remaining lawsuits and by far the largest number of consumers affected," Microsoft general counsel Brad Smith said. "We feel very good that we've put these cases behind us in California, and we feel confident about resolving other cases as well."

The Redmond, Wash.-based software giant would not say whether it was negotiating agreements similar to the California settlement with the other states.

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The private antitrust lawsuits are separate from a case Microsoft settled last year with the Justice Department and several states.

The antitrust lawsuit filed in California by a private San Francisco-based law firm was scheduled to go to trial next month. The final cost of the settlement will depend on the number of California consumers who submit claims during a four-month submission period later this year.

The settlement requires Microsoft to provide $1.1 billion in vouchers, equivalent to 28.4 percent of all the money that California consumers and businesses paid for Microsoft products from February 1995 to December 2001

Consumers and businesses may use the refund to purchase desktop, laptop or tablet computers that run on Microsoft Windows or any other operating system, including rivals from Apple Computer or Linux. They may also purchase monitors, scanners, pointing devices, keyboards or other hardware, as well as software from any provider.

Two-thirds of any unclaimed portion of the settlement amount will go to California's poorest schools in the form of software, hardware and money for technology programs, under the terms of the agreement.

Critics immediately blasted the deal, saying California "sold out" to the software giant in part because of a $34.6 billion budget deficit and the continuing economic downturn.

"This seems to be a country where you can buy justice pretty easily these days, especially in these hard hit economic times when the price of justice goes down," said John Perry Barlow, co-founder and vice chairman of the Electronic Frontier Foundation. "If there's ever been a company that abused antitrust law to the detriment of consumers and the economy, it is Microsoft."

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