United Front Cracks in Case Against Microsoft

In the first crack in the government’s united front against Microsoft Corp., South Carolina said Monday that it will quit the antitrust case that accuses Microsoft of using predatory tactics to protect its software dominance.

South Carolina Atty. Gen. Charles Condon said he decided to end his state’s participation in the trial since America Online Inc.’s recently announced $4.2-billion bid to acquire Microsoft rival Netscape Communications Corp. and, separately, form an alliance with Sun Microsystems Inc. The merger proposal proves that “competition is alive and well” in the technology industry, Condon said in a statement. “Anyone who has been Christmas shopping lately knows that we are seeing rapid innovation and falling prices in the technology industry.”

A spokeswoman for the Justice Department said the pullout “will have zero impact on the case.” No other state indicated Monday that it was wavering in its support for the landmark case, which was brought earlier this year by 20 states, the Justice Department and the District of Columbia.

South Carolina’s move was applauded by Microsoft officials, who said they hope other states will reconsider.

Microsoft general counsel William Neukom said Microsoft has filed a motion seeking access to America Online, Netscape and Sun merger documents to rebut the government’s claim that it controlled the distribution of Internet browsing software.

A shake-up in the government coalition litigating the antitrust trial has been expected by some experts in the wake of last month’s elections and the financial burden of pursuing the case.

Although Condon, a Republican, won reelection in November, five of the 20 other state attorneys general participating in the case left office or were defeated. In addition, two others could be replaced: Dennis C. Vacco, who is in a runoff with challenger Eliott L. Spitzer in New York, and District of Columbia Corporation Counsel John M. Ferren, who will be serving under a new mayor next month.

South Carolina--which has contributed $20,000 to $40,000 for trial costs--said it will fulfill a previous commitment to make a second five-figure contribution for trial costs. But future expenses will have to be picked up by the remaining states pursuing Microsoft, Condon said.

“I can no longer justify our continued involvement or the expenditure of state resources on a trial that has been made moot by the actions of the competitive marketplace,” he said.

Microsoft said it gave $20,000 this election cycle to the Republican Party in South Carolina. State GOP Executive Director Trey Walker described the contribution as among the largest received.

Since last spring, when they dropped their separate legal claim that Microsoft tried to use its dominant Windows operating system to monopolize the market for business productivity software, the states have chafed at being in the shadow of the Justice Department in the Microsoft case. Over the objections of the department, the states have filed a motion to have their lawyers separately cross-examine witnesses.

Any political payoff from the case appears increasingly remote: Experts say the AOL deal probably reduces the likelihood that the government will win a big monetary award from Microsoft that might endear the attorneys general to voters.

“I wouldn’t attribute any defections to this case being a loser, but I can see where officials might look at the [legal] bills and say, ‘Why are we doing this?’ ” said Carey Heckman, co-director of Stanford University’s Law and Technology Policy Center.

But most officials downplayed South Carolina’s defection, saying it will have little impact on the case.

“The 19 states and the District of Columbia are going to move forward,” said Tom Miller, who heads an executive committee of the states that oversees the litigation. “The evidence against Microsoft thus far has been strong. If the case was going badly and someone left, it could have a serious effect. But that’s not the case here.”

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Spokesmen for the New York and Utah state attorneys general said they also remain strongly in support of the antitrust case.

The trial, now entering its eighth week, will resume today when David J. Farber, a telecommunications professor from the University of Pennsylvania, takes the stand. In direct testimony made public Monday, Farber said Microsoft’s integration of its Internet Explorer Web browser with its Windows operating system is inefficient and could have “negative technical consequences,” including “performance degradation” and “increased risks of [software] ‘bugs.’ ”

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Associated Press was used in compiling this report.

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