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States look into MS bundling

A growing number of states are joining forces in their antitrust investigation of Microsoft.

A growing number of states are joining forces in their antitrust investigation of Microsoft (MSFT).

Attorneys general from a number of states held a three-day meeting in Chicago last week to discuss possible antitrust actions against the software giant See special report: MS-DOJ case in court and followed up with a conference call today, according to Chris McKenna, a spokesman for the attorney general's office in New York.

At least nine states are conducting independent investigations of Microsoft, including Florida, Illinois, Minnesota, New York, Texas, California, Oregon, Massachusetts, and Connecticut.

"We set up the meeting and the purpose was to track out a future path," McKenna said. "If we or the other states take action, there are several paths we can take. We can team up with each other or go our separate ways. If we are to go against Microsoft, we want to maximize our resources."

The issue that brought the agencies together involves Microsoft's bundling of its browser with its operating system, he added. However, "we're not limiting [our investigations] to just that issue."

Although no decisions came out of the meeting, a conference call was held today among the nine agencies to touch base on new potential issues and to gauge any possible timing for a next step.

"I don't know if any other meetings are planned, but they're confident that they will meet again. They just haven't set it up," McKenna said.

A Microsoft spokesman said the company was unaware of the meeting until today and has received formal demands for evidence only from Texas. "We're confident that when they hear both sides of the story, they'll agree that competition in the software industry is very intense and that consumers are benefiting from constantly better products [and] rapidly falling prices," noted spokesman Mark Murray.

Meanwhile, some attorneys general were a little more hesitant to discuss the issues. "Our staff lawyers were in Chicago at the meeting, but we can't go into details," Ron Dusek, a spokesman for the attorney general's office in Texas, told CNET's NEWS.COM. "We were there to discuss the issue in general about Microsoft and what might be done and whether a group effort would work. It was exploratory."

Illinois attorney general spokeswoman Lori Corral declined to give details about last week's meeting except to say it involved a "working group that is looking into certain antitrust issues that are related to Microsoft's bundling of service features with its operating system."

>>>> The meeting last week came at a time when the company was given a temporary injunction that prevents it from requiring computer makers to bundle in its Internet Explorer browser in order to license the Windows 95 operating system. The order, issued by U.S. District Judge Thomas Penfield Jackson, stemmed from antitrust action taken by the Justice Department.

Microsoft is appealing that injunction.

Of the nine states that are believed to be investigating Microsoft, only Texas has taken any kind of concrete action. In early November, Texas attorney general Dan Morales sued the company in state court over contract terms that require customers and licensees to inform it before providing information to state and federal investigators. The suit alleged that the practice is making potential witnesses clam up, hampering the state's investigation of Microsoft.

In his order last week, Jackson denied to act on a similar complaint lodged by the Justice Department, saying the government had not "offered anything more than speculation that the NDAs [nondisclosure agreements] might deter" licensees from assisting investigators. The judge's ruling suggests that in order to prevail, Texas will have to offer concrete evidence that the NDAs are thwarting its investigation.

Typically, the resources of a state attorney general's office are dwarfed by those of large corporations. State attorneys often find that it makes sense to pool their resources, as they have in recent actions against the tobacco industry.

Gary Reback, an attorney at Wilson Sonsini Goodrich & Rosati, said a number of Microsoft competitors he represents have received requests from states about the company's business practices but declined to elaborate.