California to Microsoft: Not So Fast!

The likelihood of a quick, negotiated settlement that was acceptable to all parties in the Microsoft antitrust case was dealt a major blow on Thursday when California Attorney General Bill Lockyer said he would continue to urge the 17 other states to take

The likelihood of a quick, negotiated settlement that was acceptable to all parties in the Microsoft antitrust case was dealt a major blow on Thursday when California Attorney General Bill Lockyer said he would continue to urge the 17 other states to take the review time they needed to fully understand every word and every implication in the proposal before they decided whether to settle.

In a statement released late Thursday night, Lockyer said doing anything less "would be irresponsible and Im confident the court will agree. We intend to complete our review as expeditiously as possible."

This development follows media reports that Microsoft and the Justice Department were close to a negotiated settlement, but that the attorneys general from the 18 states involved in the case were baulking at the conditions of the deal and the speed with which they were being pushed to accept it.

Lockyer said he was no stranger to the challenges of the issues at stake in the case. "The last time I saw a public policy issue as important and difficult as Microsoft decided under impossible time constraints and without a chance for adequate public review was when California passed its electricity deregulation bill," he said. "Im not about to stand by and see that happen again."

Interestingly enough, it was also Lockyer who announced late last month that prominent Washington lawyer Brendan Sullivan had joined the team of state attorneys general as lead trial counsel, "in their battle against the illegal monopoly of Microsoft."

"California is retaining Mr. Sullivan and the Williams & Connolly firm for the benefit of the litigating states," Lockyer said in a statement at that time. "We are committed to the mediation process and reaching an effective, enforceable settlement with Microsoft, but also are prepared to go to trial if necessary in the interest of consumers and fair business competition."

This is also not the first time Lockyer has spoken out publicly. In September he and his New York counterpart Eliot Spitzer said that they would pursue "strong and effective relief that will promote competition and consumer choice in the marketplace."

They were then reacting to the public announcement by the DOJ that it would not pursue the breakup of Microsoft or the tying count of the original complaint---essentially whether the bundling of the Internet Explorer browser to the Windows 95 and 98 operating systems was illegal.

But Lockyer and Spitzer left no doubt at that time that they would push aggressively for Microsoft to be punished---with or without the Justice Department---and that any remedy deceided upon needed to address not just past harm but future behavior, most notably the upcoming Windows XP operating system.

They also were clear that they would press for additional remedies if they disagreed with those sought by the Justice Department. "We look forward to continuing to work with the Department of Justice in the proceedings that are about to begin before the trial court, but will, if necessary to protect the public, press for remedies that go beyond those requested by the Department," they said in a prepared statement.

"Part of the remedy must be forward-looking," they said. "Therefore we will insist that Windows XP---Microsofts latest version of its personal computer operating system---receive close scrutiny in arriving at a judicially ordered remedy. As the U.S. Court of Appeals found, some of the ways that Microsoft unlawfully crushed competition from Netscape included bundling Microsofts Internet browser to its Windows operating system, and pressuring industry computer makers into refraining from adding Netscapes browser to the computers that they sold. It is imperative that Microsoft not have another opportunity to use Windows XP to suppress competition in emerging Internet areas."

Some industry watchdog and lobby groups are also vehemently opposed to the settlement proposals believed to be under discussion, saying these were a "sell-out" by the DOJ.

"I am glad that Californias Attorney General has taken this stand and I hope that the settlement provisions being bandied around will not be acceptable to the other states," said Ken Wasch, the president of the Software and Information Industry Association, a trade group with many Microsoft rivals as members.

"Whats the Justice Department thinking here, working for 11 years on an antitrust case and then effectively prepared to settle for nothing," he asked, while talking to eWeek from his office in London.

Wasch, who has met with Justice Department officials four times over the last two months, declined to give specifics around those discussions, but said: "They listened more than they talked."

But his input appears to have had little effect. "We are shocked," he said. "The Justice Department once before entered into a consent agreement with Microsoft in 1995 and Microsoft scoffed at it before the ink was dry."

The proposed settlement also relies on Microsoft partners like PC-makers to keep a watchful eye over it.

"Its unbelievable to me," Wasch said. "The terms I have heard about so far are so outrageous. To effectively assign the role of policeman to the OEMs is absurd. All the OEMs are dependent upon Microsoft or they have nothing to sell. Suddenly those companies who depend in many instances on Microsoft for their survival are going to blow the whistle on their lifeline? Thats crazy."

The proposals also failed to deal with the two major issues of the matter: "Preventing Microsoft from technically tying products and from contractually tying products," Wasch said.

The arguments that the states did not have the resources to pursue the case on their own also did not hold up, he said. "Suddenly our antitrust enforcement depends on legislature funding for prosecutors."

"The other argument that things have changed in the country due to the September 11 attacks also doesnt hold water," he said. "I didnt know that our antitrust laws should be enforced in good times, become more lax in less good times and abandoned altogether after a terrorist attack."

But the matter is far from over. Microsoft, the Justice Department and representatives of the state attorneys general will all appear before District Court Judge Colleen Kollar-Kotelly on Friday morning in Washington to update her on the mediation around a negotiated settlement.

That court briefing will be followed by a news conference to be held by Attorney General John Ashcroft and Assistant Attorney General Charles James for an update on the Microsoft antitrust case.