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Microsoft's remedy doesn't budge much

The company files a remedy proposal in its antitrust case that closely matches a settlement cut with federal and state trustbusters. It also has harsh words for a rival remedy proposal.

WASHINGTON--In a widely anticipated move, Microsoft filed a remedy proposal in its antitrust case Wednesday that closely matches a settlement cut with federal and state trustbusters last month.

The Redmond, Wash.-based company also delivered a harsh rebuttal to a remedy proposal filed Friday by nine states and the District of Columbia, which refused to sign the settlement agreement forged by the government.

"It is readily apparent (both from the terms of their proposal and from their comments to the press) that the non-settling States seek to punish Microsoft and to advance the commercial interests of powerful corporate constituents--Microsoft competitors such as Sun Microsystems, Oracle, Apple and Palm. Neither objective is appropriate under the antitrust laws," according to the Microsoft statement.

Rather than craft a new remedy proposal, Microsoft submitted the Justice Department settlement plus the harsh rebuttal to the litigating states' proposal.

In the 20-page brief, Microsoft urges U.S. District Judge Colleen Kollar-Kotelly to reject the states' proposed remedy and to accept the settlement cut with state and federal trustbusters in November.

Microsoft's position of no compromise is hardly surprising, say legal experts.

"They've never really budged or made any material concessions from what's already been offered from what I have ever seen," said Robert Christopher, a managing partner with Coudert Brothers in San Jose, Calif.

Earlier on Wednesday, the Senate's powerful Judiciary Committee convened a hearing on the settlement, where lawmakers from Utah, Vermont and Wisconsin raised concerns the deal would not go far enough.

see special coverage: Microsoft, DOJ reach settlement Committee Chairman Patrick Leahy, D-Vt., said the settlement proposal appeared to have "a few too many loopholes" and was an "invitation to the next chapter of litigation."

In November, the Justice Department and nine of 18 states agreed to settle the nearly 4-year-old antitrust case. Kollar-Kotelly still must approve the agreement, which is undergoing 60 days of public comment as mandated by the Tunney Act.

Nine states--California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia--and the District of Columbia are pursuing the case. Nine others joined the Justice Department in the settlement with Microsoft: Illinois, Kentucky, Louisiana, Maryland, Michigan, New York, North Carolina, Ohio and Wisconsin.

The litigating states want, among other things, for Microsoft to give away its Internet Explorer Web browser, port Office to other operating systems, and carry Sun Microsystems' Java in Windows for 10 years.

"In many respects, the non-settling States' proposed conduct restrictions are no less extreme than plaintiffs' previous proposal to break up Microsoft into separate operating system and applications companies, which plaintiffs discarded in view of the Court of Appeals' decision," according to Microsoft's brief. "The non-settling States' proposed 'relief' is tantamount to divestiture."

Side-by-side tracks
For now, the settlement and remedy proposals are moving side by side on separate legal tracks. But they could meet before the case reaches its final destination.

One option available to Kollar-Kotelly is to attempt to bring about settlement. While the provisions affecting Microsoft's software code are likely "non-negotiable" points for the company, in many other areas the states' remedy proposal merely tightened perceived loopholes in the settlement agreement.

"It would be very interesting to see if the judge doesn't look (to see) if there still might be a way to bring the two sides together," said Andy Gavil, an antitrust professor with Howard University School of Law. "It comes down to whether from the states' remedy proposal she perceives a gulf or a chasm between the two sides."

Coudert Brothers' Christopher agreed. "I think that would be a smart thing for her to do, to send them back to the (settlement) table, either with the force of her own involvement or a designated mediator's involvement," he said. "She's still got the federal prosecutor's office and the state attorneys general's offices involved in the negotiations, helping her bring in the nine states and Microsoft to a resolution."

During the Judiciary Committee hearing Leahy encouraged Kollar-Kotelly to "take the opportunity to consider the remedy proposal of the non-settling states, but she consider it before she makes her final determination on the other parties' proposed settlement. The insights of the other participants of this complicated and hard-fought case are going to be valuable additions."

Kollar-Kotelly doesn't have to take the Senate hearings into account, "and she probably won't," Christopher said. "That's not what judges do, especially given what Judge Jackson went through."

Kollar-Kotelly got the case after a federal appeals court removed U.S. District Judge Thomas Penfield Jackson from presiding over the case for out-of-court comments he made to the media.

"She's going to play things by the book and ignore the press, outside distractions and other proceedings as much as she can," Christopher said.

Even if Kollar-Kotelly approves the settlement, she will likely still strive to find middle ground between Microsoft's and the litigating states' remedy proposals.

"It's only natural that she's going to want to find some middle ground," Christopher said.

A hearing is scheduled for March, at which time both sides will make their case for a remedy based on a June appeals court ruling that upheld eight separate antitrust violations against Microsoft.