States Split Over Microsoft Settlement

The states involved in the Microsoft antitrust case are split over the federal government's settlement with the software company and may push for further litigation or, at least, an extension of the mediation process. Both sides have been given until 2 p.

WASHINGTON -- The states involved in the Microsoft Corp. antitrust case are split over the federal governments settlement with the Redmond, Wash., software company and may push for further litigation or, at least, an extension of the mediation process. Both sides have been given until 2 p.m. today to iron out their differences.

In a hearing before U.S. District Judge Colleen Kollar-Kotelly, attorney Brendan Sullivan, who is leading the combined legal efforts of the states in the Microsoft case, said one-third of the 18 states involved in the suit had signed on to the settlement, reached late last week between the federal government and Microsoft. Another one-third was rejecting the pact as too lenient, while the final one-third was undecided.

Sullivan told the court, which was set to rule on the settlement this morning, that the states who remain opposed to the deal are willing to pursue further litigation, but would consider an extension of the mediation process.

Microsoft representative John Warden all but rejected the notion of further mediation, saying, "the issues in this case have been beaten to death and they have been beaten to death by people who are worn out.

"Microsoft is [disappointed] at the progress that has come out of this weekend," Warden told the court. "Microsoft believes the settlement process has come to an end."

Judge Kollar-Kotelly delayed her ruling on the settlement until 2 p.m. to give the six undecided states time to decide their position. The court would not reveal which states are in which camp.

The action in federal court comes after a weekend of intense negotiation, which lasted well into the early morning hours Tuesday, sources said. The federal settlement with Microsoft was clearly introuble as early as Monday, when Massachusetts Attorney General Tom Reilly said he would not sign off on unless major changes were made to it.

In a statement released late on Monday, Reilly 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 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.

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.

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.