State Chafes At Microsoft, DOJ Settlement

The antitrust case against Microsoft took a turn when the Massachusetts attorney general said he would not sign off on the DOJ's settlement with the software maker unless major changes were made to it.

The landmark antitrust case against Microsoft Corp. took another turn on Monday, when Massachusetts Attorney General Tom Reilly said he would not sign off on the federal governments settlement with the Redmond, Wash., software firm unless major changes were made to it.

This sets the stage for a split among the states themselves over whether or not to support the proposed settlement reached last week between Microsoft and the U.S. Department of Justice.

Last Friday, U.S. District Judge Colleen Kollar-Kotelly gave the 18 states involved in the case until Tuesday morning to decide whether or not to support the proposed settlement in the anti-trust case.

But Reilly, in a statement released late on Monday, said: "The agreement reached by the U.S. Department of Justice and Microsoft is fundamentally flawed. It has enormous loopholes and may prove to be more harmful than helpful to competition and to consumers. We will show the utmost respect for the court and the process while at the same time conveying our problems with this agreement."

Microsoft, of Redmond, Wash., had a "long and consistent pattern of violating the law and not playing by the rules. The original goals of this suit were to restore competition and prevent a return of illegal and abusive conduct. This agreement is license for Microsoft to use its dominance and power to crush its competition. We all lose if that happens," he said.

Earlier at a press conference held in Boston Reilly said that he and other attorneys general were prepared to ask a federal judge to impose a remedy that was harsher than the one Microsoft reached with the Justice Department, which was "riddled with exceptions" and would allow Microsoft to "crush smaller rivals," according to a Reuters report.

Reilly, who declined to say which other states would join him in opposing the settlement plan, said he would ask Judge Kollar-Kotelly to impose stiffer restrictions on Microsoft during what are called "Tunney Act" hearings. These are public hearings held by the court to determine that an antitrust settlement is in the public interest.

A source who declined to be named said the most likely large states to support Massachusetts would be California, New York and possibly Iowa.

Bill Brammer, a spokesman for Iowa attorney general Tom Miller, who leads the 18-state Microsoft Working Group, declined to comment on the statements made by Massachusetts Reilly, saying this would form part of the report to the court on Tuesday.

"The states are still working intensively to review the settlement and talking again this evening and will report to the Judge on Tuesday morning," he told eWeek.

Microsoft spokesman Jim Desler declined to comment ahead of Tuesdays court hearing, except to say: "We remain hopeful that some of the states will agree to settle on Tuesday."

Neither the attorneys general for California and New York nor Microsoft could be immediately reached for comment. But Californian attorney general Bill Lockyer was the first to speak out last week about the proposed settlement, saying 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.

He and his New York counterpart, Elliot Spitzer, have also previously said they will pursue "strong and effective relief that will promote competition and consumer choice in the marketplace."

"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 September.

Other parties also plan to voice their objections to the proposed settlement plan in Tunney Act hearings. Ken Wasch, the president of the Software and Information Industry Association, a Washington, D.C.-based trade group with many Microsoft rivals as members, said he would "vigorously oppose and object to" the proposed settlement in these proceedings.

"We are shocked. The Justice Department once before entered into a consent agreement with Microsoft in 1995 and Microsoft scoffed at it before the ink was dry. Whats the Justice Department thinking here, working for 11 years on an antitrust case and then settling for nothing," Wasch said.

Microsoft, the Justice Department and the states will all again meet in Judge Kollar-Kotellys courtroom on Tuesday for a status conference and to determine the schedule for Tunney Act proceedings and the timetable for possible additional litigation from those states who decline to settle.