Microsoft settlement may be delayed

Associated Press

WASHINGTON — Microsoft Corp. and the Justice Department agreed to present a settlement of their antitrust fight to a trial judge today, but states involved in the case will ask for more time, people familiar with the negotiations said.

The Bush administration seemed on the brink of settling the historic case, launched under its predecessor, with wide implications for the sagging economy and technology industry that relies heavily on Microsoft products.

State attorneys general who joined in the original lawsuit decided Thursday to proceed more slowly and ask U.S. District Judge Colleen Kollar-Kotelly for an additional four days to a week to examine the details, people close to the talks said.

The decision by Microsoft and the Justice Department to proceed without the full support by the states threatened to widen the gulf between state and federal officials who are partners in the case.

The proposed deal would change how Microsoft packages and sells its flagship Windows operating system and make it easier for consumers to remove certain features and install rival programs from other software makers, according to those briefed on the negotiations.

The settlement would impose some restrictions on Microsoft during the next five years and could be extended two more years, until 2008, if the company violated terms of the deal, the sources said, speaking on condition of anonymity.

A three-person panel would monitor Microsoft’s compliance, they added. The current antitrust case is rooted in allegations that Microsoft violated a related 1995 agreement with the Justice Department.

If states cannot support the settlement, they could object during public hearings in an effort to scuttle the deal, or they could decide to pursue the case separately in court themselves.

Justice Department antitrust chief Charles James made personal calls Thursday to enlist the states’ support, sources said.

The markets reacted positively to word of a possible deal that experts hope will invigorate the sagging technology sector. Microsoft shares surged $3.69 to close at $61.84.

A court has already ruled Microsoft operated as an illegal monopoly and improperly thwarted competitors. But the original penalty imposed in the case, which would have required Microsoft to be split into two companies, was overturned by a federal appeals court this summer.

If some states decide to oppose the deal, they could use a Tunney Act hearing to try to persuade Kollar-Kotelly to throw out the settlement on grounds that it wasn’t in the public interest.

Legal experts said such a maneuver, however, would be a long shot.

The Bush White House has favored a settlement with the software giant. Spokesman Ari Fleischer said the president has faith the Justice Department "will make good decisions that serve the national interest."

Critics weren’t as quiet.

Rep. John Conyers, D-Mich., the House Judiciary Committee’s top Democrat, accused the department of making "inexplicable and irrational" concessions in the settlement talks.

"This is like losing a game by forfeit when your team was ahead with the bases loaded and your best batter on deck," Conyers said.

Justice and Microsoft officials declined comment.

The prospective settlement would not require complete disclosures by Microsoft of the underlying programming code for its dominant Windows operating system, according to business analyst David Readerman of Thomas Weisel Partners in San Francisco.

A lawyer involved in the talks said Microsoft would give developers access to other details about the underpinnings of Windows that would let rivals create software that worked seamlessly with the flagship operating system.

Microsoft also would have to offer a version of Windows without extra features side by side with versions that bundle those features, the sources said.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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