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States split on MSFT settlement
graphic November 6, 2001: 4:14 p.m. ET

Nine states reject DOJ-Microsoft settlement; to pursue litigation.
graphic graphic
NEW YORK (CNNmoney) - Nine of 18 states said they would pursue tougher litigation against Microsoft Corp. Tuesday, rejecting a proposed federal settlement that the other states had endorsed earlier in the day.

Connecticut Attorney General Richard Blumenthal announced the states' intentions to pursue further litigation following a court hearing in Washington, D.C., to review the government's settlement.

The parties intending to continue legal action include nine states - Iowa, Connecticut, California, Massachusetts, Florida, Kansas, Utah, Minnesota, and West Virginia - as well as Washington, D.C.

"Our intention is to proceed in the litigation," Blumenthal said. "I believe this (federal) agreement reflects very good progress, but it may not be good enough to protect consumers against misuse of monopoly, or recurrence of violations of law."

Blumenthal said the government's agreement provides a good foundation, but that he and the other eight states would seek tighter restrictions against Microsoft's retaliation against companies with which it competes, tougher enforcement, and more clearly defined regulations.

West Virginia Attorney General Darrell McGraw, who appeared on CNNfn's The N.E.W. Show, said he would like to see Microsoft open up the codes that make up the Windows operating system. He said his state wants an effective remedy that addresses the monopolistic practices of this enterprise. (622KB WAV)(622KB AIFF)

The settlement pact, which Microsoft and the U.S. Justice Department reached late last Wednesday and presented in court last Friday, imposes a broad range of restrictions on Microsoft's business practices, which would be upheld by an independent, on-site, three-member panel of computer experts.

"We are pleased that a number of states have joined the Department of Justice in supporting this settlement," Microsoft Chairman Bill Gates said in a statement Tuesday. "The fact that so many states have joined the federal government in supporting this agreement is a very significant, positive step toward resolving these issues once and for all."

The agreement places the nine states and the Justice Department in position to end their historic litigation against Microsoft, and the rest of the parties to continue with the antitrust case.

U.S. District Judge Colleen Kollar-Kotelly on Tuesday left open both possibilities, setting two tracks in the case. She scheduled hearings to consider the settlement and set a schedule for the antitrust lawsuit to proceed.

The judge also ended her order requiring the parties to meet nonstop with a court-appointed mediator.

"I put to test their fortitude and they persevered," she said, giving no hints how she would rule on the settlement.

"We're hoping the remaining states will join in this agreement so that everyone can focus on the future and avoid the unnecessary costs and delays of further litigation," Gates said. "While this decree will place significant restrictions on Microsoft's business, we believe this is a fair and reasonable settlement that will be good for consumers, good for the high-tech industry and good for the economy."

The Justice Department said last week the proposed settlement would address Microsoft's anti-competitive practices by allowing personal computer makers to install non-Microsoft software on new products.

It would also prohibit retaliation against firms that use competitors' applications and require Microsoft to disclose technical information so that other companies could design products that work with its Windows operating system.

But critics object to a clause in the settlement that allows Microsoft to restore after 14 days any changes made to Windows by computer makers. It also lets Microsoft maintain the secrecy of any technical details of its anti-piracy, security, anti-virus or encryption technology.

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Meanwhile, the ongoing case with the states is not Microsoft's only legal problem. The software maker also faces a European probe. The European Commission said Monday its investigation of Microsoft was continuing despite the settlement announced in the U.S. last week. graphic

from staff and wire reports