Truce Reached with AOL

AOL Time Warner has agreed to settle its private antitrust lawsuit against Microsoft for a cash payment of US$750 million. The two companies also agreed to share technology, license or distribute one another’s products, and discuss cooperating in other areas, including digital media, digital rights management, and instant messaging. However, many parts of the agreement—particularly those relating to digital media—were only tentative and may not lead to significant changes, and the two companies will continue to compete in many areas.

What the Agreement Says

According to AOL CEO Richard Parsons, the détente between the two companies began with a personal phone call from Microsoft Chairman and Chief Software Architect Bill Gates in spring 2003. After several weeks of negotiations, the two companies announced a multifaceted agreement in May, some parts of which involve real change and others which are mere shifts in tone.

The following provisions are definite:

Lawsuit ends. In exchange for a US$750 million cash payment, AOL has ended its private antitrust lawsuit alleging that Microsoft used its monopoly on desktop OSs to dominate the Web browser market at the expense of Netscape. (AOL bought Netscape for US$4.3 billion in 1998.)