Microsoft antitrust ruling faces appeal

Massachusetts officials said Friday they will appeal a recent ruling in Microsoft's long-running antitrust case, while seven other states intend to drop their opposition.

"We are going to appeal," state Attorney General Tom Reilly said Friday during a conference call. "This appeal is necessary to protect consumers."

Massachusetts delivered its decision ahead of a Monday deadline. Nine plaintiff states have 30 days from U.S. District Judge Colleen Kollar-Kotelly's Nov. 1 ruling to decide whether to file an appeal. That ruling upheld virtually all of a settlement between Microsoft, the U.S. Justice Department and nine other states, establishing its provisions in a consent decree.

But Massachusetts is not being supported by most of the other states that had previously criticized the settlement as inadequate. "We are going it alone," Reilly said.

The Bay State, along with California, Connecticut, Florida, Iowa, Kansas, Minnesota, Utah, West Virginia and the District of Columbia, had rejected a November 2001 settlement that Microsoft cut with the Justice Department and nine other states.

In a Friday statement, Iowa Attorney General Tom Miller said, "Seven states and the District of Columbia will not appeal Judge Kollar-Kotelly's decree in the Microsoft antitrust case. We will move on to enforcing the decree on behalf of consumers and fair competition.

"For most of our states, it is time to dedicate our resources to enforcement of the decree and the law," Miller said.

By Monday, West Virginia officials are expected reach a decision on whether to join Massachusetts.

In making its decision to appeal, Massachusetts is focusing on accountability. Reilly said he wanted to send the message that "breaking the law does not pay."

The Massachusetts attorney general noted that Microsoft had been found guilty of violating U.S. antitrust laws, and he described the remedy and separate settlement as being filled with "loopholes."

A consumer group praised Massachusetts? decision.

"We applaud Attorney General Reilly for deciding to appeal the remedy recently issued in the Microsoft case," the Consumer Federation of America said in statement. "This action seeks to defend critical antitrust principles that were established in the unanimous appeals court ruling that found Microsoft guilty of violating the antitrust laws."

Microsoft spokesman Jim Desler, however, said the company?s "focus remains on complying fully with the court's judgment, working collaboratively with governments to address important public-policy issues and on developing innovative products that will benefit consumers."

No to stiffer sanctions
In separate rulings on Nov. 1, Kollar-Kotelly approved the Justice Department settlement with minor modifications and instituted the revised settlement as her remedy in the plaintiff states' proceedings.

The states had asked the judge to impose a remedy that would affect Microsoft's software code, for instance compelling the company to release a second version of its latest operating system, Windows XP, with certain applications removed.

But the judge largely rejected the states' request for stiffer sanctions.

"The decision is a virtual rubber-stamp of the proposed settlement," said Hillard Sterling, an antitrust attorney with Much Shelist in Chicago. "This judge didn't think that more was necessary to preserve competition. She clearly didn't buy the litigating states' premise, that Microsoft was an evil empire that needed to be punished severely."

Legal experts predicted that Massachusetts could face tough going, particularly if no other states join in on the appeal.

Bob Lande, an antitrust professor with the University of Baltimore Law School, described Kollar-Kotelly's decision as "virtually appeals-proof."

"Our colleagues from Massachusetts are appealing the decision, and we wish them well," Iowa?s Miller said. But he agreed with legal experts that "there are serious issues subject to appeal."

Reilly maintained that Massachusetts had no problem with going it alone. "Microsoft is crushing...innovation," he said. "Without competition, our economy has no future. Competition is the key to this case."

Whatever the outcome, the appeal will keep legal pressure on Microsoft at the same time that the states accepting Kollar-Kotelly's remedy focus on enforcement. Two separate bodies--a technical committee overseeing the settlement and compliance committee overseeing the remedy--will enforce Microsoft's compliance.

"While not completely satisfying, the court decree closed enforcement loopholes, keeps compliance with the remedies squarely before the court and allows us now to turn attention to making sure that Microsoft competes fairly in the marketplace," California Attorney General Bill Lockyear said in a statement.

Miller noted that as a result of the ruling, Microsoft will pay the states $28.6 million. Additionally, the software maker is paying $3.6 that million the states will use for continued enforcement and compliance, and the states retain the option of asking the courts for additional enforcement funds.

Meanwhile, the Redmond, Wash.-based company faces other legal challenges. A three-day hearing next week in Baltimore will determine whether Microsoft will be compelled to carry Sun Microsystems' version of the Java Virtual Machine in Windows XP. Sun has filed a request for a preliminary injunction on the matter, as part of a larger lawsuit against Microsoft.

Meanwhile, the European Union's Competition Commission is expected to issue a preliminary ruling soon in a separate antitrust investigation pending against Microsoft.