Government surprises Microsoft foes

Legal experts say the anti-trust case against Microsoft still has some rough waters to negotiate even after the US government said yesterday it is abandoning its push to have the company broken up.

          Legal experts say the anti-trust case against Microsoft still has some rough waters to negotiate even after the US government said yesterday it is abandoning its push to have the company broken up.

          Microsoft's foes were surprised when the US Department of Justice released a statement saying it would no longer seek to break up the company in the case that is now back in US District Court. The government also said it would no longer pursue the "tying" claim against Microsoft, which alleged the company illegally tied its web browser to Windows to maintain its monopoly in the operating system market.

          "We are surprised and disappointed," says Jason Mahler, vice president and general counsel for the Computer and Communications Industry Association, a vocal critic of Microsoft. "All through the case the basis for a break-up was the monopoly issue, and that was upheld by the Appeals Court."

          The US Court of Appeals for the District of Columbia Circuit ruled on August 24 that Microsoft did indeed have a monopoly in the operating system market, but it sent other key issues in the case, including the tying claim, back to the US District Court for further review.

          "It seems the primary motivation was to get something done quickly, and conduct remedies can be completed quickly," says Mahler.

          In fact, the Justice Department said in its statement that its actions were to facilitate a prompt resolution to the case.

          "Microsoft just basically gets away with murder and its revenues keep rising," says James Love, director of the Consumer Project on Technology, an IT consumer watchdog agency in Washington. "There's no evidence that Microsoft has been made to pay the price yet," he says. "Their concessions are always less than advertised."

          But while the Justice Department may be hoping for a quick resolution, it also is admitting that its push for a breakup was severely weakened by the Appeals Court ruling.

          "The Court of Appeals was more than clear in that it didn't see the need for structural remedies for the Microsoft violation," says Marc Schildkraut, an antitrust lawyer at Howrey, Simon, Arnold and White, a law firm in Washington.

          The government now says it will focus on conduct remedies when the case re-opens on September 21 with a status report hearing before Judge Colleen Kollar-Kotelly. The sides must file a joint status report to the court on September 14, which should reveal what sort of conduct remedies the two sides have in mind.

          "The report will show a little bit about what the issues are in terms of a settlement," says Jim Desler, a spokesman for Microsoft.

          The remedies are likely to focus on limiting Microsoft's licensing restrictions and retaliatory tactics that came to light during the case. It also may focus on opening up application programming interfaces to third-party vendors.

          Schildkraut says he thinks the government may also go after limiting Microsoft's ability to dictate what OEMs must include with the Windows operating systems they install on their hardware. "I think the government will go after allowing OEMs to pull things out of the operating system," he says. That means OEMs may be able to unbundle such things as music players and photography software, similar to what is now bundled in the forthcoming Windows XP, if those elements are defined as not part of the OS.

          But Schildkraut also says that by dropping the tying claim now the government may have a difficult time in the future proving what software tied to the operating system actually helps Microsoft maintain its monopoly.

          "By dropping the tying claim it may weaken future claims by the government," says Schildkraut. "They may not be able to prevent bundling in the future. The question will be, why does bundling a music player maintain the Microsoft monopoly? So, how does the government prohibit that?"

          The 18 states that joined with the government in the anti-trust action against Microsoft could pursue the tying claim on their own and keep the issue alive, but that is unlikely.

          "The states are on board with the DOJ on the decision not to pursue a breakup," says Tom Miller, attorney general of Iowa, through a spokesman. "Since the court of appeals decision, the states and the DOJ have directed their efforts to one objective: the quickest and the most effective remedy possible. This decision is consistent with that objective."

          The settlement on conduct remedies will begin later this month when the two sides head back to court. The proceedings could take up to six months, according to legal experts. The judge will set a remedy hearing that could include witnesses. Even after a verdict is rendered, however, each side would have the right to appeal.

          "Given that Microsoft has woven the internet into its operating system with Hailstorm and .Net, it will make it difficult for Microsoft to suggest to the DOJ a settlement they can accept," says Schildkraut.

          The IDG News Service contributed to this report.

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Tags antitrust

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