Posted on: Wednesday, November 7, 2001
Microsoft lawsuit split in two
By D. Ian Hopper
Associated Press
WASHINGTON — The coalition of states that held firm throughout the Microsoft monopoly case splintered yesterday, with some planning to settle and some pressing on.
Last-minute negotiations prompted nine states to join the Justice Department in settling antitrust charges against the software maker.
Nine other states and the District of Columbia are continuing with the landmark litigation, leaving U.S. District Judge Colleen Kollar-Kotelly to decide how Microsoft ultimately should be punished.
"We've parted ways in some respects today," said Iowa Attorney General Tom Miller, a leader of the coalition of 18 states.
The judge said she would pursue two simultaneous tracks.
She scheduled a hearing to determine whether it was in the public interest to accept the settlement, and set a timetable allowing the remaining states to argue for tougher penalties. Both tracks would culminate early next year.
Yesterday's developments were the fruit of marathon, day-and-night negotiations between Microsoft and the states that began after the Justice Department struck a tentative deal last week.
Microsoft made some additional concessions — including some dealing with how much information it would disclose to rivals about its software that powers computer servers for businesses on the Internet. The Justice Department signed off on the changes.
The concessions prompted New York, Ohio, North Carolina, Michigan, Kentucky, Illinois, Maryland, Louisiana and Wisconsin to join in the deal.
Among the holdout states were Connecticut and Iowa, two of the leaders of the coalition, and California and Massachusetts, home to some of the nation's most prominent technology companies.
A few hinted they might sign the agreement in the future. "I literally will go home to Iowa and sleep on it, and give it the deliberation it still deserves," Miller said.
Microsoft chairman Bill Gates urged the holdout states to join the settlement and "avoid the unnecessary costs and delays of further litigation."
One of his key lawyers suggested the company was finished negotiating.
"Microsoft believes the settlement process has come to an end," attorney John Warden told the court. "The issues in this case have been beaten to death, and they have been beaten to death by people who are worn out."
Kollar-Kotelly, who took over the complicated case this fall, praised the parties for their marathon negotiations and ordered an end to the mandatory sessions with a mediator. She urged the unsettled states to continue private negotiations.
"I put to the test their fortitude and they persevered," the judge said, giving no hints of how she would rule on the settlement.
Officials familiar with the talks said six states want more time to consider the settlement and remain open to the deal. California, Massachusetts and Minnesota are prepared to continue with antitrust litigation against the software company, the officials said.
New York Attorney General Eliot Spitzer said the revised settlement was sufficient for his state. As for the holdout states, "if they can get more I will be thrilled," he said.
California Attorney General Bill Lockyer emerged as the new point man for states wishing to pursue the litigation.
"While the settlement proposals are a step forward, they fail to provide adequate remedies for Microsoft's illegal use of its monopoly power to crush innovative technology," Lockyer said.
Microsoft rival AOL Time Warner, which lobbied states over the weekend to turn down the agreement, said the settlement was bad.
"That agreement fails to protect consumer choice and promote competition by leaving Microsoft free to continue to abuse its monopoly," AOL Time Warner general counsel Paul Cappuccio said.
The late concessions forced by the states would broaden the disclosures Microsoft must make to rivals about the operation of its powerful server software.
By adding the phrase "or the Internet" to one section, lawyers for the states explicitly required Microsoft to reveal technical details about servers other than just those used for office networks. That slight change could broaden the settlement to cover Microsoft's future business strategies of providing Internet services.
Previously, the Justice Department convinced Microsoft to agree to provide technical details to help rivals make products compatible with its Windows operating system and to give an oversight panel full access to its books and plans for five years.
Even with a settlement with half the parties to the case, there was new trouble brewing for Microsoft.
West Virginia Attorney General Darrell McGraw Jr. said he planned to file a new lawsuit seeking damages on behalf of every Microsoft customer in his state, arguing they were hurt by the company's practices.
McGraw said the settlement just "picks at the edges" of the Microsoft case. He still wants to see Microsoft broken up, he said, because "the creation of two or more separate companies would only result in an improvement in the economy."
Shares of Microsoft were up $1.51 to close at $64.78 on the Nasdaq Stock Market Tuesday, but fell 18 cents in extended trading.
