States Seek Extension of Microsoft Settlement

Six states and the District of Columbia are seeking an additional a five-year extension of the 2002 landmark antitrust settlement against Microsoft because they say Microsoft continues to defy the agreement. Most of the settlement terms are due to expire at the end of November.

Potential competitive platform threats to Microsofts dominance in the PC operating system market are just beginning to emerge and warrant further protection, the plaintiff states—California, Connecticut, Iowa, Kansas, Minnesota and Massachusetts—and districts said in an Oct. 16 filing with the U.S. District Court of the District of Columbia.

"The most significant of these threats are Web-based technologies that open the markets to competition by reducing the applications barrier to entry," the filing states. "Like other software, Web-based applications require computer equipment running a client or server operating system."

The filing notes Microsofts share of the PC operating system market has remained higher than 90 percent for at least 15 years and its share of server shipments has increased from 44 percent in 2000 to 73 percent in 2006.

The states also complain that Microsofts dominance of the browser market still inhibits the development of competitive products.

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"The Web-based platform threats are currently dependent on Microsofts compliance with industry standards because its [Internet Explorer] browser has an approximately 80 percent usage share," the filing states. "Until the Web-based platform threats erode the applications barrier to entry, these platform threats remain vulnerable to Microsofts control of the browser and the operating system."

The filing cites Google Gears and AIR (Adobes Integrated Runtime)—a direct competitor to Microsofts new Silverlight—as examples of emerging Internet-centric application threats to Microsoft that might be harmed if the settlement is allowed to expire. The technologies allow consumers to use the applications while offline and reduce a users dependence on Microsofts operating system or software.

"They represent a potential threat to Windows insofar as they are accessible by standards-based browsers from multiple operating system platforms, not just Windows," the filing states. "But should the final judgment expire now, Microsoft has the power to tilt the playing field towards its own technology, Silverlight."

The filing also notes Microsoft favored its own search engine in the initial release of Vista before relenting under criticism and complaints from competitors like Google. If the settlement expires at the end of November, the states complain that the lack of legal oversight of Microsofts practices might "severely" compromise Gears and AIR.

"This is not mere speculation. Microsoft has in the past engaged in anti-competitive acts that were neither pro-competitive nor beneficial to consumers in order to protect its monopoly product," the filing states.

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"The Court has an opportunity now to exercise its broad discretion to extend the final judgment to protect emerging technologies that may pose a threat to its monopoly."

The U.S. Department of Justice and the attorneys general from New York, Louisiana, Maryland, Ohio and Wisconsin are pushing for the court to wrap up its oversight of Microsoft, insisting Microsoft has complied with the terms of the settlement.

"As we believe, and the Department of Justice has stated, the consent decree has served its purpose, ending practices that the courts found were anti-competitive, and providing additional legal remedies as well," Microsoft said in a statement.

U.S. District Court Judge Colleen Kollar-Kotelly is expected to rule on the extension request at a Nov. 6 hearing in Washington, D.C.

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