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MS offers terms for DoJ settlement, but resists breakup

Last-ditch flurry as the deadline looms

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The Microsoft antitrust case appears to have moved closer to settlement. "Sources" - almost certainly lawyers from the states involved - have been leaking some information, although it is also possible that Microsoft has been looking after its own PR interests. Publicly, neither side is making any statements at the moment. What MS may give away Reports suggest that Microsoft is totally unwilling to give way on any form of breakup, but does accept that discriminatory pricing would have to end; exclusionary contracts would end; that Windows APIs would have to be disclosed; and that tying products to Window would also stop; Microsoft is now thought to be willing to break the tie between Windows 98 and Internet Explorer. If the DoJ has in fact agreed that it would not demand break-up, it can be assumed that rigorous controls to end the abuse of Microsoft's monopoly will be required. This is characterised as a conduct, rather than a structural, remedy. It is known that Judge Jackson is ready to issue his findings of law on Tuesday, and if he follows what he did in the case of the findings of fact, it would be after the stock exchange closes. It seems that Judge Jackson said this to lawyers from both sides on Tuesday when he held a private conference with them in Washington. Reports suggest that the judge would delay issuing his findings if both sides came to him and said they were near an agreement. The details are likely to take some time to work out - probably in the order of two weeks - since the DoJ will not wish to be caught in the same way as it was in 1994. No lawyers from either side have been seen travelling to Chicago to meet with Judge Posner, the mediator. Nor is it known at the moment whether the lawyers were planning to work at the weekend, but it would be surprising if this were not the case. Some reports suggest separate meetings would be held with Judge Posner this weekend, while other reports say there will be joint meetings. But no weekend talks had been scheduled by mid-afternoon Friday. No loopholes, this time? A detailed proposal from Microsoft was believed to have been sent to the DoJ on Friday. The most important details that do not yet appear to have been considered concern provisions for monitoring and accountability - something woefully absent from the 1994 consent decree, which was finally signed by Judge Jackson at the instruction of the court of appeals in 1995. When the previous consent decree was negotiated, there was considerable time pressure imposed by the then antitrust chief Ann Bingaman, which made it possible for Microsoft to slip in the ambiguity as to whether Microsoft had the right to produce "integrated products". This resulted indirectly in the current case, after the DoJ had filed suit to ask the court to stop Microsoft's alleged contempt of court for not following the terms of the consent decree. Judge Jackson agreed and issued a preliminary injunction, but he was reversed by the court of appeals in what many see as a flawed majority decision. In view of Microsoft's history in negotiating in something less than good faith, it is unlikely that Judge Jackson will allow negotiations to drag on for very long. Although the chances of settlement must now be more than 50 per cent, an agreement is far from certain. It does seem that Microsoft is concerned that the findings of law should not be issued, as this would give more strength to the many class action suits already filed. It has been reported that Microsoft has been in court in Salt Lake City arguing that documents from the Caldera settlement should not be available to the class-action lawyers. If agreement is reached, the next step would almost certainly be a consent decree. This would then have to be approved under the terms of the Tunney Act, which was introduced by Congress in an effort to stop sweet deals between the DoJ and antitrust miscreants. In the case of the previous consent decree, the Tunney Act proceeding was extended by Judge Stanley Sporkin following a last-minute intervention by the law firm of Wilson Sonsini, acting for a number of Microsoft's competitors. In the event, the court of appeals essentially ignored the Tunney Act and ruled against Judge Sporkin's opinion that the consent decree was inadequate. It is unlikely that the DoJ would be so meek this time, and if there's any attempt to ignore the Tunney Act, objections - of which there are likely to be very many indeed - would almost certainly cause the matter to end up in the supreme court. The court of appeals has shown itself to be partial to Microsoft in the past. The DoJ has the right to take the case directly to the supreme court if it desires. The way in which Microsoft's adherence to a consent decree would be monitored can only be guessed at, but it is likely that there would be a third-party involved, with a designated procedure to examine Microsoft's actions. Such a third party would also be able to receive complaints, examine them, and require disclosure of information by Microsoft under court rules. If Microsoft did not cooperate, it could find itself back in court facing a contempt motion that could result in its breakup. If a settlement is reached, it would be a judicial triumph for Judge Jackson and Judge Posner - always providing that the settlement works to break Microsoft's monopoly and restore competition to the industry. There is no possible monetary fine for Microsoft as a result of the present case, although the class-actions could result in a very large settlement after the cases are consolidated. Microsoft showed it did not welcome the almost certainly unpleasant outcome of the Caldera case, but it is a wily negotiator. The DoJ now has great responsibility for ensuring that this time it gets the right agreement. ®

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