States Wary of DOJ, Microsoft Deal

Facing a Friday deadline, Microsoft and the Department of Justice struggled to reach a settlement in their protracted anti-trust litigation. But ongoing concerns among state attorneys general complicated last-minute negotiations, suggesting that the end i

The judge in the Microsoft Corp. anti-trust case today pushed back a key deadline to give state attorneys general more time to mull a tentative agreement between the software maker and the Department of Justice. The delay came one day after proposed settlement terms were leaked to the press, sparking criticism of the deal, especially among representatives of the 18 states involved in the case, some of whom saw the terms as far too lenient.

U.S. District Court Judge Colleen Kollar-Kotelly, who had set a Friday deadline for the parties to settle, said the states would have until next Tuesday morning to agree to the proposed settlement. The decision capped a day of anxious speculation and negotiation during which the states, racing to analyze the settlement terms, negotiated intensely among themselves to reach consensus, according to a source with one state attorney generals office.

Washington attorney Brendan Sullivan Jr., who is leading the combined legal efforts of the states in the Microsoft case, requested the additional time to make sure, "were not trading litigation today for a decade of litigation over enforceability."

The proposal under review called for Microsoft to agree to five years of monitoring by the federal government, but included no strong enforcement mechanisms, according to sources familiar with the case. The settlement would not require the software maker to change the design of Microsofts Windows software and would allow the company to continue bundling its own products into its operating systems, a significant victory for Microsoft.

Also, Microsoft would allow OEMs to more freely install competing software along with Windows and would require Microsoft to make some source code available to competitors.

The settlement terms fell far short of the structural changes and market-opening measures sought by several states and proposed at earlier stages in the litigation, sources said.

Microsoft spokesman Jim Desler told eWEEK that the company continued to "work hard trying to achieve a settlement." But he declined to comment on the reports of the proposed settlement, except to say they were "premature and speculative."

For some Microsoft users, the settlement negotiations offered little prospect for enhanced competition in the operating system sector. "I dont think a settlement will make any difference," said Craig Schultz, a systems engineer in Vancouver, British Columbia. "Obviously we cannot really trust Microsoft. If you dont break them up, youre just wasting everyones time and money."

Anti-trust proponents assailed any settlement terms that failed to give OEMs the power to remove Microsoft software and replace it with rival software or to compel Microsoft to include rival software.

"I think the federal government has sold out," said Norman Hawker, research fellow at the American Antitrust Institute in Washington. "This would be like if youre ahead three games in the World Series and in the middle of the last game you suddenly decide to forfeit. Why they are snatching defeat from the jaws of victory is an important question."

Other technology stakeholders welcomed movement toward a settlement, however, applauding the governments efforts to avoid further prolonging the court proceedings. "What would really be good for consumers is to put this thing behind us," said Jim Prendergast, executive director of Americans for Technology Leadership in Washington. "We feel as though this has gone on too long."

However, consumer advocates rallied last week to press for stringent settlement terms. Calling the tentative agreement terms "outrageous," the Consumer Federation of America, Consumers Union and Media Access Project said the government must impose penalties on Microsoft to prevent future anti-competitive behavior.

Charging that settlement terms under consideration were weaker than interim remedies ordered before the Court of Appeals ruled that Microsoft had behaved as a monopolist, the Software & Information Industry Association charged that OEMs would take on the burden of spurring competition in software applications.

In September, New York Attorney General Eliot Spitzer and California Attorney General Bill Lockyer said they would pursue "strong and effective relief" in the case. They made it clear that they would push aggressively for Microsoft to be punished for past anti-competitive behavior and establish terms to prevent future anti-competitive behavior, particularly with regard to Windows XP -- even if it meant splitting with the DOJ.

Additional reporting by Peter Galli