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States criticize Microsoft behavior

Two of the state attorneys general who spearheaded the antitrust case against Microsoft say the software giant "may be repeating its efforts to maintain and extend its monopoly."

Two of the state attorneys general who spearheaded the antitrust case against Microsoft say the software giant "may be repeating its efforts to maintain and extend its monopoly" by bundling features into its newest operating system.

Attorneys General Richard Blumenthal of Connecticut and Tom Miller of Iowa issued a terse news release Wednesday afternoon saying they have "serious concerns" about Microsoft's "very troubling" strategy for its Windows XP operating system, which will debut in the fall.

However, Blumenthal and Miller dismissed reports that they are preparing to file a second antitrust lawsuit against Microsoft.

Their statements accompany mounting complaints from antitrust experts that the Redmond, Wash.-based software giant is still using the type of monopolistic business tactics that sparked the original antitrust case, currently under review by the U.S. District Court of Appeals, which is expected to rule soon.

Microsoft's decision to bundle Internet Explorer into the operating system was the foundation for the antitrust case now under appeal. The attorneys general for 19 states and the Justice Department sued the company in 1998, alleging it used its monopoly in the operating system market to capture the Net browser market.

Critics say the company is reverting to old tactics by loading Windows XP with features such as instant messaging and Smart Tags, which gives Microsoft some greater control over consumers' Internet use. Windows is the operating system on roughly 92 percent of all personal computers around the world.

"Microsoft is a more powerful monopoly then ever before. They have three separate monopolies," said Mike Pettit, president of ProComp, an organization backed by Microsoft rivals Oracle, Sun Microsystems, America Online and others. ProComp leaders discussed Microsoft on Wednesday at the annual summer meeting of state attorneys general in Vermont.

"We were just explaining to them the way Microsoft is using its multiple monopolies, which are interlocked, both to protect those monopolies and expand them and, ultimately, to control the Internet," Pettit said.

Blumenthal and Miller dismissed a report published earlier Wednesday by The Associated Press saying the pair is preparing to file a second antitrust lawsuit against the software giant.

"We have no current plans for a second lawsuit," Blumenthal and Miller said in the statement. "We would never completely rule out a new suit, but our focus now is on the antitrust case that already is before the courts."

Microsoft dismissed the attorneys' general concerns, noting that the newest operating system was designed to "deliver the best experience to users," not necessarily to force out rivals.

"It is unfortunate our competitors continue to spread misinformation about Microsoft's products," said Microsoft spokesman Jim Cullinan. "That seems to be their only strategy--to invest in lobbying regulators rather than innovating and improving their products."

Attorneys and antitrust experts speculated that the statements from Blumenthal and Miller are meant to send a message to the Bush administration.

"There's a great deal of consternation among the attorney general ranks as to whether the new administration will support the current case," said Daniel M. Wall, chair of the antitrust department of San Francisco-based law firm Latham & Watkins. "By saying that they're going to bring an action for a similar practice is sort of a way of saying that they remain committed to the original case and that come what may, they're going to keep pursuing the original case."

Many observers expect the new administration to be easy on Microsoft after the appeals decision is issued, possibly allowing a settlement that leaves the company in one piece.

Last June, U.S. District Court Judge Thomas Penfield Jackson ordered that Microsoft be split into two separate companies, one specializing in software and Web products--such as Outlook, Internet Explorer, BackOffice and the Microsoft Network (MSN)--and another specializing in operating systems.

The U.S. District Court of Appeals is reviewing Jackson's decision and is widely expected to roll back many of his harsher penalties.

"They're implicitly saying they're probably going to lose," economics professor Stanley J. Liebowitz said of the anti-Microsoft statements issued Wednesday by Blumenthal and Miller. "They don't think there's a chance in hell Judge Jackson's decision's going to stand, because if it were they wouldn't have to do this because Microsoft would be split."

Liebowitz, who teaches at the University of Texas at Dallas and is co-author of "Winners, Losers, and Microsoft: Competition and Antitrust in High Technology," said the statements were a last-minute effort to build momentum for a cause that many people think is lost.

"Let's say you've got a prisoner who's facing the death penalty and then an attorney brings up another charge against the criminal," Liebowitz said. "Why would you bring up another charge if you think the guy's going to be put to death? There are people in Washington talking about just throwing out the (Microsoft) case. That's got to be pretty scary for the attorneys general."

Those in favor of breaking up Microsoft have become especially concerned about a pro-Microsoft appeals decision in recent weeks as Microsoft executives have boosted their lobbying forces and forged alliances in Washington, D.C.

Last month, two lobbying groups unveiled studies claiming that Microsoft has not stifled competition. The report from The Association for Competitive Technology and the Computing Technology Industry Association was a rebuttal of criticism from Microsoft rivals Oracle and Sun Microsystems, which charged that the XP Microsoft.Net Web services strategy would force its technologies on Internet users.

Meanwhile, Microsoft CEO Steve Ballmer paid a "courtesy call" Tuesday to Vice President Dick Cheney to discuss a range of issues but did not bring up the imminent appellate ruling.

Ballmer is visiting the nation's capital for two days of meetings with members of Congress and major customers, said Microsoft spokeswoman Ginny Terzano. On Wednesday morning Ballmer addressed a work force summit hosted by the Department of Labor, speaking primarily about Microsoft's efforts to prepare workers for the high-tech work environment.

Others dismiss the statements by the attorneys general as little more than political posturing.

"My initial reaction is, are these guys running for re-election?" said Luke M. Froeb, associate professor of management and former economist to the antitrust division of the Justice Department. "It could be a bunch of free publicity."