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S Carolina defection fails to shake States v MS

One state withdrawing from the antitrust action doesn't look like starting a flood

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South Carolina has dropped out of the parallel action against Microsoft by 20 states and the District of Columbia, apparently agreeing with Microsoft that the case is now pointless. State Attorney General Charlie Condon claimed yesterday that the AOL deal had proved there was competition in the marketplace. Condon said he had joined the action because he was concerned that Microsoft was obtaining a monopoly over access to the Internet, but he now considered that "innovation was thriving" and that "there are no monopolies on the Internet". He also said that "consumers have not taken a leading role in this action" and so he did not wish to spend tax money on the case. South Carolina was the least active of the states in the action, with nobody from his office having attended the court. In view of what Condon said, it is rather hard to see why he agreed to join the action in the first place. Texas, previously a prime mover for action against Microsoft, withdrew at the last minute because of pressure from Dell, Compaq and other companies with significant manufacturing in the state. In South Carolina it is unlikely that there was such pressure from manufacturers, but it would be surprising if Microsoft lobbyists hadn't been busy putting pressure on each state attorney general and helping to draft press releases. And after all, Bill Gates had visited North Carolina recently (not a party to the action), but not the southern neighbour. The parallel action by the states was merged with the DoJ action by Judge Jackson. In July, the states amended their complaint to exclude a complaint about Microsoft's monopoly with its Office suite. There are several reasons for there being a parallel action, and no single explanation applies to all states. Microsoft countersued the states, but this is seen to be a tit-for-tat action and not serious. The real reason for Condon's volte face needn't be seen as Netscape-related. He now says his sympathies are with the Milton Friedman school of economics, which reckons government intervention will hurt innovation and reduce corporate profits. Compare this to Microsoft press releases ("innovation should be left to entrepreneurs, not to government bureaucrats or to the courts"). Microsoft says it is "gratified" at the decision, but Bill Neukom, Microsoft's head lawyer was whistling into the wind hoping that other states would join South Carolina. New York state AG Dennis Vacco's office said that Condon's decision would "have no impact" and that it was a "non-event". The DoJ said the decision would have "no impact". Iowa AG Tom Miller, who is chairman of the states' executive committee supervising the action, said the states were "very committed" and Condon's action was "surprising. The trial is focussed on alleged illegal conduct." Meanwhile Kevin Arquit, former head of the bureau of competition at the FTC, said that "The Netscape-AOL combination doesn't reduce Microsoft's operating system monopoly by one iota. Bill Gates' chokehold on the operating system - and consumers - is as strong today as it was two weeks ago. His ability to overcharge consumers for Windows is clear evidence of market dominance." ® Complete Register trial coverage

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