Hopes of deal fade as DoJ rejects MS offer

Proposal was complex, but not good enough

Microsoft's settlement proposal is apparently not good enough for the DoJ and the plaintiff states: the two sides remain "sharply divided", according to reports over the weekend citing "sources familiar with the matter". Microsoft's proposal was faxed on Friday to each plaintiff state, as well as to the DoJ. It has been described as "complex" and "incomplete", with the lawyers requiring technical assistance to be able to understand the offer. The DoJ was apparently polling the states' lawyers over the weekend as to their opinion about Microsoft's document. No bilateral talks have been held so far, other than one joint meeting with Judge Posner at the beginning of the mediation. ABC News reported that a source said Microsoft agreed to oversight of its business practices by the government, but not to what it could do so far as adding features or functionality to Windows, and that Microsoft was insisting that it not be required to admit that it had violated the law. A Los Angeles Times report suggests that DOJ and state officials may declare today (Monday) that negotiations are at an impasse. It seems that DoJ and plaintiff states lawyers agreed to consider a settlement proposal that did not require breakup, with the DoJ apparently outlining the areas that would have to be addressed. It 's probable that the mediator, Judge Posner, could well have been responsible for bringing this about as a way of getting the talks going again after they had essentially stalled. The Washington Post also suggests that an idea that has arisen is "offering computer makers choices about what software they wanted installed on their products". It is of course extraordinary that Microsoft should have power over such matters in the first place, so the sooner there is a uniform price list, the better it will be for users and the industry generally. Although it is possible that a more acceptable proposal could be negotiated, it appears that Microsoft's effort at brinkmanship has been trumped by Judge Jackson with his Tuesday deadline. He would need confirmation from the DoJ and/or Judge Posner that negotiations were really getting somewhere before agreeing not to release his findings of law on Tuesday. For Microsoft, the key issue is that Jackson's findings of law are a finding on the merits of the case, which could be used by the class-action litigants, although Microsoft would fight this of course. Under the Clayton Act, it will be possible to use the findings of fact. If Microsoft appealed, it is likely that findings could not be used in the interim, although the precedents are mixed about this. It is strange that any sincere effort by Microsoft to settle the case would have been couched in obcsure technical terms. At this stage, all that was needed were some simple heads of agreement. It rather looks as though Microsoft is making a PR play, and is trying to regain some credibility. If so, it is a dangerous game, since Microsoft could be accused of conduct consistent with an effort to manipulate its stock price. The relationship between the state attorneys and the DoJ was always going to be a little difficult, and it is to be expected that now there is some substance to consider, there will be some differences of opinion. However, on the whole, the more likely result is that the states will act as a stiffener to the DoJ. Should there be a settlement, we predict that a role will have to be found to Bill Gates, to show what a clever fellow he is, and how he saved the day. During the consent decree negotiations in 1994, it was said that it was at his insistence that four critical words were removed in the integrated product clause, but we have our doubts about this. Judge Jackson has made his opinion clear: he said he didn't see a distinction between Gates' control of Windows and Rockefeller's control over oil prices. ®

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