Software

U.S. vs. MS: It’s Almost Over

WASHINGTON — The U.S. government’s antitrust pursuit of Microsoft is nearly over.

On Friday, the Justice Department and Microsoft announced they had signed a deal to end the controversial lawsuit by replacing any threat of a breakup with restrictions on the software company’s future conduct.

“The settlement is fair and reasonable and, most important, is in the best interests of consumers and the economy,” said Microsoft Chairman Bill Gates said in a statement.

Friday’s agreement, which must be approved by Judge Colleen Kollar-Kotelly, sharply limits Microsoft’s ability to retaliate against its customers and partners for embracing competitors’ technologies.

It also represents an anticlimactic end to what was once heralded as the antitrust case of the century — a legal assault on the world’s most influential software company that the Clinton administration began in May 1998.

That lawsuit emboldened Microsoft’s competitors and spurred an avalanche of private antitrust suits, but also led to a dramatic fall in technology shares immediately after the breakup order became public in Spring 2000. It did not substantially interfere with Microsoft’s plans to launch Windows XP.

Wall Street analysts applauded the settlement agreement, and Microsoft shares (MSFT) rose 1.5 percent to $62.79 by mid-afternoon.

What happens next depends in large part on the state attorneys general, which filed a parallel case simultaneously with the Justice Department and are not bound by Friday’s agreement.

Judge Kollar-Kotelly, at a hearing on Friday, gave the states until next Tuesday to review the details of the legal agreement. Kollar-Kotelly had tried to compel a settlement by urging the legal teams for all three sides to meet in hopes of reaching an agreement this week.

“If states have reached an agreement we will discuss that,” Kollar-Kotelly said of next week’s hearing. “If (there is) no agreement or partial agreement, the court will address remaining dates. At that point we will decide whether to go on parallel tracks of compliance and litigation. We will wait and see.”

Speaking on the steps of the courthouse after the hearing, the state attorneys general seemed positive but lukewarm.

Iowa’s Tom Miller said: “We worked very closely with the Department of Justice. I want to thank Microsoft for the spirit they brought…. The agreement represents progress.”

Elliot Spitzer of New York said the “document is an enormous step forward. (It) does not give everything but it realizes the risks, and fairness, is important for the national economy.”

“Microsoft has been declared an illegal monopolist by nine federal judges, including one who determined it was necessary to break up the company. They should be held accountable for their unlawful actions, and prevented from further abusing their monopoly position,” said Ed Black, president of the Computer and Communications Industry Association.

Black said that “the government won an unbelievably big case. For us to have at this time the Justice Department accept the same terms that it rejected a few years ago is phenomenal. It does not protect competition.”

When asked about the possibility of political influence — U.S. presidents have in the past intervened to encourage or discourage antitrust suits — Ashcroft denied it.

“In no respect did the White House seek to shape or influence the outcome in a way that — did they seek to shape or influence the outcome,” Ashcroft said during the press conference.

    • Microsoft makes no “admission” of guilt or wrongdoing.
    • The Justice Department will post a notice in the Washington Post and the San Jose Mercury News by Nov. 15 that gives the public two weeks to comment on the agreement.
    • Microsoft may not “retaliate against” a computer maker in any way, including raising prices for Windows or withholding technical support, for cozying up to Microsoft’s competitors.
    • Microsoft must set a schedule of prices it will charge computer makers for Windows and stick to it. Prices can include volume discounts — but can’t vary based on how many non-Microsoft products the vendor installs.
    • Computer makers like Dell, Gateway, and IBM will be allowed to install non-Microsoft products and “desktop shortcuts of any size or shape” for that software.
    • Microsoft will tell its developers about heretofore-confidential programming interfaces that products like Word or Excel rely on to link to Windows code. This requirement applies to any new “version of a Windows operating system product.
    • Microsoft “shall not retaliate” against software or hardware developers because their products compete with other Microsoft applications.
    • Microsoft’s ability to ink deals with any other company to promote Windows products “exclusively or in a fixed percentage” will be sharply curtailed.
  • A panel of three independent computer experts will have full access to Microsoft’s campus, records, systems, and employees to monitor compliance with the agreement.

In June, the U.S. Court of Appeals for the D.C. Circuit halted the breakup of Microsoft and sent the case back to Kollar-Kotelly — but ruled unanimously that Microsoft had violated antitrust laws.

The federal appeals court also upbraided U.S. District Judge Thomas Penfield Jackson, threw out his order that Microsoft be broken into two companies, and removed him from the case. But the appeals court agreed with Jackson that Microsoft had broken antitrust law and should be punished.

In stentorian language seldom heard in discussions of a fellow jurist, the appeals court unanimously condemned Jackson’s “rampant disregard for the judiciary’s ethical obligations” and said he’d no longer be permitted anywhere near this case.

Microsoft argued that Jackson’s cozy chats with reporters about the case were an ethical breach that revealed his bias and tainted his rulings against the company. The appeals court should have tossed out the whole case as a result, Microsoft told the justices.

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