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Microsoft antitrust deal earns mixed grades

Justice Department deems soon-to-expire agreement a "success," but unimpressed prosecutors representing California and other state plaintiffs urge lengthier oversight period.

Editor's note: This blog was updated at 12:40 p.m. PDT with additional information from the Department of Justice filing and a link to Microsoft's report.

With most of Microsoft's antitrust settlement with the government poised to expire this November, federal and state prosecutors overseeing the Windows giant's compliance were divided Thursday on the deal's past and future effectiveness.

One one hand, attorneys for the U.S. Department of Justice and a posse of state plaintiffs known as the "New York group," which also includes Maryland, Wisconsin, Ohio and Louisiana, proclaimed the 2002 consent decree with the Bush administration an unqualified success. In a court filing with U.S. District Judge Colleen Kollar-Kotelly on Thursday, they said the agreement has accomplished its intended goals.

"The final judgments have been successful in protecting the development and distribution of middleware products and in preventing Microsoft from continuing the type of exclusionary behavior that led to the original lawsuit," Thomas Barnett, assistant attorney general in charge of the Justice Department's Antitrust Division, said in a statement.

But attorneys for the so-called "California group" of plaintiffs--which also includes Connecticut, Iowa, Kansas, Minnesota, Massachusetts and the District of Columbia--had a different story to tell. Those attorneys, who have a history of being more openly critical of Microsoft than their prosecutorial counterparts, argued in their filing (PDF) that the agreement has been largely ineffective. They suggested that a 10-year term for the consent decree, which they characterized as "standard" practice, would be preferable to the existing five-year life span, particularly since Microsoft only recently released Windows Vista.

"The decree has not lived up to its goal of increasing market competition," Brown said in a statement accompanying the document.

Specifically, in the market at the heart of the antitrust case--that is, for Intel-compatible PC operating systems--Microsoft's share has remained fairly constant, from 93 percent in 1991 to 92 percent in 2006, the filing said. In the Web browser arena, Redmond has seen its market share slip from 95 percent in 2002 to 85 percent in 2006, which the California group attorneys argue is "still well above monopoly levels." And on the server operating system front, Microsoft has actually seen its market share climb from 55 percent in 2002 to 72 percent in 2006, the filing argues.

Microsoft, in its own report, (PDF) delivered a rosy assessment of the decree's effectiveness. It shot back at the California group's arguments by contending that the final court orders were never designed to reduce its market share, "to bring about fundamental structural changes in the IT industry or to override choices made by consumers about which PC operating systems or other software products they would use."

Evidence that the consent decree has been doing its job lies in the company's declining market share in the realms of Web browsing, audio and video players, Java virtual machines, e-mail and instant messaging, Redmond said in its filing.

The Justice Department and New York group plaintiffs, for their part, took a nearly identical stance in their filing: "Microsoft was never found to have acquired or increased its monopoly market share unlawfully. Therefore, the final judgments were targeted to reinvigorating competitive conditions that Microsoft had suppressed, not to slicing off some part of Windows' market share."

Microsoft General Counsel Brad Smith also pointed in a statement to the company's adoption last summer of 12 "tenets" aimed at promoting user choice and competition, saying they're intended to apply after major portions of the consent decree expire in November. But the skeptical California group plaintiffs said in their filing that the effectiveness of that pledge remains to be seen.

It's not immediately clear how Kollar-Kotelly will react to the divergent outlooks. But they're likely to take center stage during the next periodic court hearing involving the parties, which is scheduled to occur on September 11.