Most Microsoft settlement money unclaimed

This is the strange case of the $1 billion nobody wanted.

Starting in 2003, Microsoft Corp. began settling a series of consumer class-action antitrust suits, including one in Minnesota. The suits accused the world's largest software company of using its influence to overcharge for software such as Microsoft Windows, Word and Excel.

But so far, nearly 44 percent of the money in 16 of those settlements -- $376 million -- has gone back to Microsoft because nobody tried to claim it. If the current claims rate continues in four other states where claims still are in progress (Iowa, Wisconsin, New York and California), Microsoft will save itself more than $1 billion of the $2.6 billion allocated for the settlements.

As a result, money that was to be paid out based on allegations that Microsoft misused its influence as an industry giant could go to help Microsoft grow even larger. Microsoft is trying to buy Internet portal Yahoo Inc. for more than $40 billion in what would be its biggest acquisition ever.

The good news for Minnesotans is that they kept the highest percentage of Microsoft's settlement money of any of the states where claims are complete.

In 2004, Minnesotans were given a chance to claim $174.5 million in settlement money. They actually claimed $63.9 million, or about 37 percent, and left $110.6 million on the table. Under the terms of the Minnesota settlement (and those in the other 15 states), half of the leftover money went to state public schools. Microsoft got to keep the other half, or $55.3 million.

Consumers and businesses in 15 other states claimed substantially less. In Massachusetts, only 1 percent of $34 million was claimed.

In South Dakota, it was 2 percent of $9.3 million, and in North Carolina about 9 percent of $89.2 million. In fact, after Minnesota, the next-largest claim on the Microsoft settlement money was in Nebraska, where 11 percent of $22.6 million was claimed.

(These cases are only slightly related to a federal judge's ruling in a 1998 government antitrust lawsuit against Microsoft that was settled in 2001.)

Why would so many people pass up so many millions of dollars? Experts offer several theories: consumer apathy, the degree to which attorneys for the plaintiffs publicized the availability of settlement money, and the way Microsoft structured the payments -- in small amounts per person and almost never in cash.

In Minnesota, consumers who had no receipts for past Microsoft software purchases could still claim up to $100 in vouchers that could be used for new computer equipment or software.

Claiming more than $100 required having kept receipts or product numbers for previously purchased software. Businesses made claims based on their software licenses, for which Microsoft had records.

"If each person's claim is so small, it's often just not worth the trouble to make a claim," said Daniel Shulman. Shulman is an antitrust attorney with the law firm of Gray Plant Mooty in Minneapolis.

In addition, he said, people are less motivated to make a claim if they can get only vouchers for future purchases instead of cash.

"The redemption rate on vouchers is traditionally very low, although I don't know why," Shulman said.

Daniel Gifford, a law professor and antitrust expert at the University of Minnesota, thinks offering vouchers for relatively low dollar amounts, such as $100, reduces the likelihood people will make claims.

"You have to look at what the recovery is for a typical person," Gifford said. "If it's small, then a lot of people won't bother to make a claim."

Defending the vouchers

Microsoft disagreed.

"The vouchers were very versatile," said Steven Aeschbacher, Microsoft's associate general counsel for law and corporate affairs in Redmond, Wash. "They could be used for almost any computer-related expenditure a consumer could want to make, and over a long period of time." Whether offering cash would have boosted claims isn't clear, because in Iowa, the only state where the Microsoft settlement offered consumers cash, the claims haven't been tallied yet, he said.

"We think people didn't make claims because they didn't feel aggrieved and were happy to have monetary benefits flow to the schools," Aeschbacher said, noting that Microsoft came up with the idea of having half of the unclaimed money transferred to public schools.

Another factor affecting claims is how hard lawyers for the plaintiffs work to encourage people to file claims, said Richard Hagstrom, an attorney at Zelle, Hofmann, Voelbel, Mason & Gette in Minneapolis who was one of the lead attorneys representing Minnesota consumers and businesses.

"We engaged in a multiweek public relations calling campaign to get people to make claims, and made close to 20,000 phone calls," Hagstrom said.

Steve Alexander • 612-673-4553