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States float Microsoft remedy
graphic December 7, 2001: 5:32 p.m. ET

Proposal calls for stricter oversight of business practices.
By staff writer Richard Richtmyer
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  • Special Report: Microsoft on trial
    NEW YORK (CNN/Money) - Opponents of the federal government's antitrust settlement with Microsoft Corp. submitted an alternative proposal Friday that would set more far-reaching restrictions on its business conduct and impose stricter oversight.

    The proposal, forged by legal officials from nine states and the District of Columbia, makes up for what they see as shortfalls in the U.S. Justice Department's settlement agreement and seeks in part to make up for what they called the "ill-gotten gains" Microsoft has made by abusing its monopoly power in the computer operating system market.

    Among the provisions in the 40-page proposal filed in the U.S. District Court in Washington is one calling for a "special master" with more power to curb anticompetitive behavior than the oversight committee the U.S. Justice Department calls for in its proposal.

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      graphic CNNfn's Steve Young talks with Iowa Attorney General Thomas Miller about Microsoft.

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    Last month, the Justice Department and nine of the states that filed the original antitrust suit against Microsoft struck a settlement deal with the software maker that imposes a less extensive set of restrictions on its business practices to be upheld by an independent, three-member panel of computer experts.

    "There would be a single person," Iowa Attorney General Thomas Miller told CNNfn Friday.

    "It would be a person that we think would have the ability to act efficiently, effectively and quickly. And that's all very important in this sector," Miller added.

    Critics of the Justice Department's settlement have argued that it does not go far enough to protect consumers by preventing Microsoft from misusing its monopoly in computer operating systems.

    The holdout states' proposal imposes a series of restrictions and requirements with respect to the way Microsoft (MSFT: down $0.82 to $67.83, Research, Estimates) licenses and shares the source code of its various products.

    Among the provisions are requirements that Microsoft: make its Office productivity applications, including Word and Excel, available for use on at least three operating systems other than Windows; unbundle "middleware" products such as instant messaging and other software from Windows; and include Sun Microsystems' (SUNW: down $0.76 to $13.39, Research, Estimates) "Java" computer language available with Windows.

    Click here for the full text of the proposal

    The alternative settlement also would require Microsoft to offer a stripped-down version of Windows - one that does not include features such as a Web browsing, digital media and instant messaging - and force the company to license the operating system to all PC manufacturers at a uniform price.

    It also would force Microsoft to offer the source code for its Internet Explorer Web browser program to other software developers at no cost.

    "More than patching the gaps and loopholes of the Department of Justice settlement, this proposed set of remedies goes beyond that to really accurately reflect the spirit and letter of the Court of Appeals opinion and the law of this case," Connecticut Attorney General Richard Blumenthal said in a news conference Friday.

    In addition to Blumenthal and Iowa's Miller, legal officials from California, West Virginia, Florida, Utah, Minnesota, Kansas, Massachusetts and the District of Columbia have refused to go along with the Justice Department's settlement deal.

    Microsoft's landmark antitrust case has been wending its way through the legal system since October 1997. After a lengthy trial, U.S. District Court Judge Thomas Pennfield Jackson last year ruled that Microsoft held a monopoly in the market for computer operating systems and illegally used that monopoly power to squelch competition in the software industry.

    Judge Jackson ordered Microsoft to split its business in two, separating its operating system unit from its applications business, to prevent it from abusing its monopoly power in the future. A federal appeals court later overturned that breakup order, returning the case to the District Court and telling a new judge to come up with a different remedy.

    That judge, Colleen Kollar-Kotelly, ordered the two sides into settlement negotiations. They struck a deal Nov. 1.

    Microsoft, which will file a legal reply to the settlement proposal next week, had little to say about it Friday.

    "The proposed remedies submitted today by the nine holdout states are extreme and not commensurate with what is left of the case," the company said in a brief statement.

    The company argued that the settlement reached with the Justice and nine of the other states is a fair and reasonable compromise and said it is hopes to be able to resolve any outstanding issues as quickly as possible.

    And the comments of some of the attorneys general who were involved in drafting the document suggested that they may be looking at it more as a starting point for further negotiations.

    "I don't think Microsoft will come out and sign on this afternoon," Iowa's Miller said. "This is a proposal for the court that Microsoft will resist. And in the end, the judge will decide."

    Shares of Microsoft fell 1.2 percent on Nasdaq Friday.  graphic


    Special Report: Microsoft on trial