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No settlement, so MS and DoJ return to court

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MS on Trial The parties in the Microsoft trial meet again in Judge Jackson's court again today after a failure to reach a settlement during Judge Posner's mediation. Although a settlement is still possible, it is clear that the DoJ has stayed resolute and that the plaintiff states have not weakened. The deliberate leaks so far, despite Judge Posner's warnings to the sides not to brief the media, suggest that Gates and Ballmer have drawn the line at the splitting of Microsoft, but that most other things are negotiable. For its part, the DoJ evidently does not think that a conduct remedy would work, in view of Microsoft's previous behaviour concerning timely disclosure, amongst other things. It is known that Microsoft is gearing up for intensive lobbying in Congress, starting with recruiting a heavyweight as its chief lobbyist in Washington to argue against any breakup, and to get Congress to put pressure on the DoJ. Microsoft has failed to recruit either Republican Kyle McSlarrow (Quale's campaign chief) or Democrat Doug Sosnik (a former Clinton adviser). Microsoft has always exhibited brinkmanship, putting off settlements until the very last moment. Bill Gates is a poker player who likes to bet on a chancy legal hand, as he first did in 1986 when he agreed to a $925,000 settlement in the Seattle Computer Products case (over rights for MS-DOS, modelled on CP/M, and developed by Tim Paterson of SCP). A second example of brinkmanship was with the consent decree: DoJ antitrust chief Anne Bingaman strengthened her hand by getting a DoJ attorney to find a district court where there were few cases pending - where "the dockets were thin", as she put it - so she could threaten quick action if Gates didn't settle. Microsoft privately briefed that it was a 'pragmatic company' that had settled in previous cases, even when it thought it was right. After speaker-phone negotiations with her and the legal teams, Gates said: "I can live with this" and agreed to the consent decree in July 1994. We have also seen a third brinkmanship example last month when Microsoft decided it did not want the publicity of the Caldera case, followed by the probability of losing, so it settled the case as quietly as possible... Following the filing of briefs over the last three months, the oral arguments today are about the proposed legal findings of fact that the judge will make. This is the last chance for Microsoft to try to convince the court that the monopolist has not monopolised illegally, and it looks like uphill work. The DoJ has confined its case to its claim that Microsoft has contravened sections one and two of the 1890 Sherman Antitrust Act. Those who are support Microsoft mostly believe the Act should be scrapped, while Microsoft's foes claim that the Act has not become outmoded. Reality suggests that what is outmoded is the speed of the judicial procedure. It's worth recalling that the present case was started in May 1998 after an abortive contempt action that started in October 1997 when the DoJ tried to blow the whistle on Microsoft's cavalier disregard for the Consent Decree. If there is to be a settlement, it would be in Microsoft's interest for this to be before any judicial finding that it had transgressed the Sherman Act, but any adverse findings are embarassing rather than painful. Based on his previous speed, it may reasonably be expected that Judge Jackson will deliver his opinion in March or April, and call for further briefs on proposed remedies, with a timetable of some three months. This would take us to around July, with his Order in the case being delivered in the autumn. Microsoft may well appeal the findings of law, hoping to buy itself enough time to delay the case until after the presidential election, with the rather slim chance that an incoming president would appoint a new attorney general who would be more amenable to settling the case on more favourable terms for Microsoft. The EU has put down a marker that may well be saying that if Microsoft is not brought to heel in the US, serious action will start in Europe. ®

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