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News > Technology
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Microsoft antitrust case near end?
Software maker and non-settling states prepare for final face-off; closing arguments next week.
June 10, 2002: 6:18 PM EDT
By Richard Richtmyer, CNN/Money Staff Writer

NEW YORK (CNN/Money) - Attorneys for Microsoft Corp. and nine states that have rejected a proposed settlement of the software maker's antitrust case submitted their last written arguments to a federal judge Monday, clearing the way for final resolution.

Closing oral arguments from both sides have been scheduled for next week. It remains unclear how long it will take the judge, U.S. District Judge Colleen Kollar-Kotelly, to return her final decision.

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Monday's filings represent each side's respective recitation of the case following nine weeks of hearings which wrapped up last month.

The federal court system has deemed Microsoft a monopolist in the market for computer operating systems and ruled that it has engaged in anti-competitive business practices that violate U.S. antitrust laws.

Last month's hearings were part of the "remedy phase" of the trial, intended to determine what restrictions and requirements the court ultimately will impose on Microsoft's business practices to prevent future antitrust violations.

The U.S. Justice Department, which filed its antitrust suit against Microsoft in 1997, reached a settlement with the company last November. Nine of the states that had joined the Justice Department in its case have signed off on that settlement.

Under the terms of that agreement, Microsoft would be subject to a range of restrictions on its business practices, including a ban on entering into licensing agreements with PC manufacturers that restrict them from working with other software developers. It would also require Microsoft to provide other software makers access to elements of its Windows source code which are necessary for them to make their applications work under the Windows operating system.

However, it does not impose any restrictions on the features Microsoft is allowed to incorporate into its Windows operating system, which was at the heart of the government's case against the company.

Nine other states - California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia, along with the District of Columbia - broke with the Justice Department's proposal, arguing that it wasn't strong enough.

Among other things, they want the court to force Microsoft to offer a stripped-down version of its Windows operating system that enables PC makers to remove features such as Web browsers and digital media players. They also want to expand the amount of source code Microsoft will be required to disclose.

In its filing, Microsoft says there were a number of "fatal flaws" in the non-settling states' case and argues that there is clear evidence that some of its competitors "have been central players in drafting provisions" contained in the non-settling states' proposal, echoing claims its top executives have made.

Many of the witnesses the non-settling states called during the hearings were executives from firms that compete with Microsoft.

The company also argues that the non-settling states' proposal reaches beyond the specific 12 acts the U.S. Court of Appeals determined were anti-competitive.

"These provisions address matters unrelated to the liability determinations upheld by the Court of Appeals – and hence are more likely to harm than to promote competition – and some appear to directly contradict at least the spirit of the Court of Appeals decision," Microsoft's filing said.

"As a result, all violate the principle that antitrust remedies should be connected to the acts found to be anti-competitive," the filing said.

During the hearings, Microsoft's attorneys called witnesses they hoped would underscore the technical obstacles to offering a stripped down version of Windows.

For their part, the non-settling states argue that a stripped-down version of Windows is technically possible and that the harsher set of remedies they're proposing is both appropriate under the Appeals Court ruling and necessary in order to prevent Microsoft from unfairly squelching competition in the future.

"In contrast to Microsoft's Remedy, the States' Remedy has provisions that address and prohibit each and every act held to be anti-competitive by the Court of Appeals, with none of the exceptions, carve-outs, ambiguities, and omissions that render Microsoft's Remedy ineffective at prohibiting a recurrence of the anti-competitive behavior," the non-settling states' filing says.

Trial watchers expect the judge to take at least a month, possibly much longer, to reach a decision. And each side has the option of appealing her final decision, which would likely extend the case at least through the remainder of this calendar year.

"My guess would be that she will basically accept the contours of the federal settlement with minor tweaks to add in from small points that the states have made," said Spencer Waller, director of the Institute for Consumer Antitrust Studies at Loyola University in Chicago.

"I don't think she's going to buy the basic argument of the dissenting states," Waller added. "Personally, I think that the nine states are right."

Waller, who has been observing the case since it was first filed, said it is possible but unlikely that either side will appeal Judge Kollar-Kotelly's decision.

The case already has been through the appeals process after a separate District Court judge, Thomas Penfield Jackson, ordered that Microsoft be broken into two companies as a remedy for its anti-competitive practices.

The Appeals Court upheld Judge Jackson's finding that Microsoft had violated antitrust laws but overturned the breakup order. It also disqualified him from re-hearing the case because he had violated ethical guidelines requiring judges to avoid public comments on pending cases to avoid the appearance of impropriety.

The case was randomly reassigned to Judge Kollar-Kotelly last August.

"This judge seems to be much more cautious," Waller said. "I'm guessing that whatever she writes will be written in a way that would be extraordinarily hard to attack on appeal. They can do it, but I think this is it, as a practical matter, in the United States."

Further complicating matters for Microsoft on the legal front are a number of follow-on civil cases - some of which already have been settled - and, perhaps more important, a separate case looming in Europe.

Last August, European regulators expanded their probe of the company's business practices to see whether it is intentionally obstructing the ability of competing software for low-end servers to operate in conjunction with Windows. They also have suggested that Microsoft is acting illegally by incorporating digital streaming media technology into its Windows operating systems.

Those are likely to be thorny issues, and ones that could drag on long after the U.S. antitrust case is finally put to rest, according Waller.

"I think the real action is going to be Europe," he said.  Top of page






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