Judge upholds most of Microsoft pact

By MICHAEL KIRKLAND, UPI Legal Affairs Correspondent  |  Nov. 2, 2002 at 12:36 AM
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WASHINGTON, Nov. 2 (UPI) -- The federal judge overseeing the Microsoft antitrust case Friday approved most of the year-old settlement between the software giant and the Justice Department.

However, U.S. District Judge Colleen Kollar-Kotelly made one major exception: she retained for herself or some other federal judge the authority to determine whether the agreement was being carried out properly.

The settlement between the Justice Department and Microsoft invested most of that jurisdiction in a three-member independent monitoring board.

The judge praised the settlement, saying "it adopts a clear and consistent philosophy such as the provisions for a tightly woven fabric."

She ruled that the "final product (the proposed settlement), although not precisely what the court would have crafted, with the exception of the reservation of jurisdiction" for the district court over the monitors, "does not stray from the realm of public interest."

The Justice Department launched its massive antitrust suit against Microsoft in 1998, alleging that the company was using access to its popular Windows operating system to force computer manufacturers and vendors to install other Microsoft products on new computers, freezing out competitors such as Netscape and Java.

After trial, U.S. District Judge Thomas Penfield Jackson ruled that Microsoft should be divided, with its Windows system forming one division and all other Microsoft products the other.

But a federal appeals court, while upholding Jackson's finding that Microsoft violated the Sherman Act, ruled that the break-up was too harsh.

The appeals court also chastised Jackson for criticizing Microsoft in media interviews, and said another judge should hear the case when it got back to the trial court level.

Kollar-Kotelly took over the case and late last year ordered the two sides to come up with a settlement.

Attorney General John Ashcroft announced that the department was giving up its demand that Microsoft be broken up -- a key part of the strategy by Ashcroft's predecessor, Janet Reno -- and the two sides reached a settlement last November.

The department was joined by nine states: New York, Ohio, Illinois, Kentucky, Louisiana, Maryland, Michigan, North Carolina and Wisconsin.

Other states that until that time had coordinated their moves with the department continued their suit without a settlement. Those states included California, Connecticut, Florida, Iowa, Kansas, Minnesota, Utah and West Virginia.

The settlement between the Justice Department and Microsoft included provisions that force the software giant to stop its aggressive tactics against competitors, and to refrain from retaliating against competitors who compete with Microsoft middleware, such as browsers.

Provisions also force Microsoft to allow competitors to plug their products into Windows, which is the operating system installed on most new computers.

The settlement also forces Microsoft to disclose source code and new products to competitors.

In her opinion Friday, Kollar-Kotelly frequently expressed doubts about the Justice Department's handling of Microsoft, saying it might have been too lenient but adding that the settlement was still in the public interest.

She was particularly critical of the provision supposedly protecting competitors from retaliation by Microsoft.

"The only lingering concern held by the court is that the (non-retaliation provision) does nothing to prevent Microsoft from making threats of retaliation," Kollar-Kotelly said, which the company has done in the past.

Microsoft issued a statement Friday evening from its Redmond, Wash., headquarters praising the judge's action.

"We are pleased that the court has conditionally approved the settlement we reached with the federal government and the nine states," the statement said.

"The settlement is a tough, but fair, compromise. It imposes significant requirements on Microsoft, but it enables us to continue to innovate and to create products that address the changing needs of our customers.

"We recognize that we will be closely scrutinized by the government and our competitors, and we will devote all the time, energy and resources needed to ensure that we meet our responsibilities."

Ashcroft issued his own statement following the ruling.

"The department is pleased with the court's decision approving the Department's settlement with Microsoft," the statement said.

"That decision confirms that the final judgment," the settlement, "furthers the public interest by fully and effectively addressing Microsoft's unlawful conduct and restoring the competitive conditions in the computer software industry."

"The court's decision is a major victory for consumers and businesses who can immediately take advantage of the final judgment's provisions."

Richard Blumenthal, attorney general of Connecticut, told The Seattle Times: "We sought more and we got more. The states should be proud of that achievement."

Jay Himes, the antitrust bureau chief of the New York state attorney general's office, told the Times: "We're pleased that the decree we negotiated with the Department of Justice will basically be the decree the judge is putting in place."

At industry rival Sun Microsystems Inc., special counsel Michael Morris issued a statement saying that the ruling "does little to advance these principles or to protect the millions of developers and businesses that want an open marketplace."

Morris said that Sun "will continue to pursue our civil case and to cooperate with the European Commission's case against Microsoft to ensure that the company does not continue to use its monopoly position to become the gatekeeper of the Internet."

The Wall Street Journal's online edition quoted Jon von Tetzchner, chief executive officer of Norway's Opera Software, as saying: "It isn't very much of a settlement at all." He added: "There were no real remedies, no actual punishment. I'm not too surprised." Opera makes a competing Web browser.

Meanwhile, it appeared that the court's ruling, which wasn't supposed to be released until after the close of financial markets, was available on its site before the close of trading Friday. Links to the various parts of the ruling appeared in postings to the technology Web site slashdot.org about 3:30 p.m.

It was unclear how early they had actually been available, but Microsoft shares, which had been trading at about $52.25 at about 2:30 p.m., began rising thereafter. The shares reached a high of $53.24 before closing at $53.00.

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