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Groups vilify Microsoft settlement

Parties against the settlement between the DOJ and Microsoft present their cases to the judge. The resounding theme: The settlement is not in the public interest.

WASHINGTON--SBC Communications and four trade groups told a federal judge Wednesday that Microsoft's landmark antitrust settlement is not in the public interest.

One other presenter, the Association for Competitive Technology (ACT), defended the settlement during the afternoon session of a hearing that could determine the deal's fate.

U.S. District Judge Colleen Kollar-Kotelly is charged with evaluating whether the deal is in the public interest, as mandated by the Nixon-era Tunney Act. If she decides it is, the settlement between Microsoft, the Justice Department and nine of 18 states will likely be approved.

Former judge Robert Bork, speaking on behalf of trade group ProComp, argued that the settlement is "indeed deeply harmful to the public interest" and "is completely deficient." He described the settlement as "a surrender" on the part of the Justice Department.

Bork contended that the deal failed to address one of the most important aspects of a June appeals court ruling that found Microsoft had violated U.S. antitrust law: the issue of commingling code. In its decision, the court found that Microsoft's commingling, or merging together, of the software code for Internet Explorer and Windows 98 constituted an anticompetitive act.

"Yet this decree does not deal with it at Microsoft remains free to bolt products together," Bork charged.

Stewart Baker, who represents trade groups the Computer & Communications Industry Association (CCIA) and the Software & Information Industry Association (SIIA), agreed with Bork.

"The commingling issue is central to this case," Baker said. "What a large role it should be playing in the remedy portion of this case. It would be reasonable to expect a significant remedy" on this point.

Baker explained the issue's significance to one of the central tenets of the government's case upheld by the Court of Appeals: that Microsoft used anticompetitive means to protect its monopoly in Intel-based operating systems.

Netscape Communications' Web browser exploded on the scene several years ago, gaining huge popularity and market share in just a year. Combined with Java, Netscape offered software developers an alternative set of application programming interfaces (APIs) to write for, Baker said, potentially unseating Microsoft's Windows monopoly.

"One of the things Microsoft did was commingle the code and make it impossible to remove from the browser," Baker said. This bolting process "guaranteed the ubiquity of Internet Explorer and its APIs."

Much ado about middleware
In the morning presentation, Microsoft and the Justice Department argued that the mandate of the appeals court is fully addressed by the settlement's sanctions governing so-called middleware and compelling Microsoft to disclose APIs. The settling states reiterated the argument in their afternoon remarks.

Richard Schwartz, an attorney for the settling states, said of the middleware market: "It is that competition the proposed decree will restore." Schwartz argued the deal would allow middleware markets to "compete freely" and would let PC manufacturers "make market-driven choices."

Schwartz pointed to the API disclosure rules, meant to ensure that competing middleware products work as well as Microsoft middleware does with Windows. He said the rules "satisfied the settling states' goal for restoring competition."

The government defines middleware as technologies such as Web browsing, instant messaging and media playback, all of which have the potential to evolve into a replacement to Windows.

But Baker didn't buy Schwartz's assurances, because Microsoft is not forced to remove its middleware from Windows--only forced access to it. One of the settlement's provisions ensures that PC makers can install whatever middleware they want on Windows. So a computer manufacturer favoring Netscape over Internet Explorer could make Netscape the default choice and remove access to Microsoft's browser.

But that involves removing only the program's icon, not the program itself, which Baker called "a meaningless act." The remaining middleware program, with the assurance of 100 percent API compatibility with Windows, would remain to woo software developers away from competing products, he charged.

SBC Communications lawyer Donald Flexner argued that the settlement would give Microsoft free rein to squash middleware threats, as it did with Netscape and Java.

"Microsoft was successful because it killed the baby threats in the crib," Flexner said.

Bork said the settlement "lets Microsoft run wild."

"Had this proposed decree been in effect in 1995, it would not have prevented Microsoft's anti-competitive campaign against Netscape's browser and Sun Microsystems' Java," Bork said.

Philip Beck, the Justice Department's lead attorney, responded later, criticizing Bork for delivering lots of rhetoric and "no legal citations" to back up criticisms of the antitrust deal. "I am flabbergasted by that statement," he said. He also ripped into a complaint raised by SBC.

Flexner argued that the settlement does not adequately prevent Microsoft from expanding its monopoly into new markets, a fault raised by other critics and the non-settling states. Nine states and the District of Columbia rejected the settlement, opting for continued litigation. Their separate remedy commences Monday, unless Kollar-Kotelly grants a Microsoft request for a two-week delay.

Beck tried to return the focus to the monopoly-maintenance claim supported by the appeals court's ruling. SBC's theory about Microsoft using its monopoly to enter new markets "was not upheld" by the courts, he said. So there would be no legal reason to restrict Microsoft's competition in other markets.

The chicken and the food supply
Gene Schaerr, who spoke for ACT, argued that competitors in fact wanted to sidetrack the settlement and use the litigating states' pursuit of stiffer sanctions to prevent Microsoft from competing in markets where they are dominant.

Schaerr used the analogy of an injured chicken in a coop. The other birds peck the injured chicken "until that chicken is no longer in competition for the food supply," Schaerr said.

The American Antitrust Institute also made a presentation questioning whether Microsoft and the Justice Department had properly disclosed all political contacts during the settlement process. The Tunney Act also requires that no backroom political deal-making influence the outcome of an antitrust settlement.

AAI attorney Mike Lenett argued that Microsoft should have disclosed all legislative contacts, rather than just those for the executive or judicial branches of government. Letting Microsoft off on the issue would "open a hole in the Tunney Act big enough to drive an army of lobbyists through, and Microsoft has an army of lobbyists," he said.

Kollar-Kotelly raised this issue in the morning session, which appeared to have been resolved in favor of Microsoft.

The judge closed the day by clearly indicating that she would treat the settlement as a separate matter from the remedy hearing scheduled for next week. At one point, legal sources speculated that she might weigh one set of sanctions against the other, choosing a single set.