Microsoft Deal Under Bipartisan Fire in Senate

Senate leaders gave a bipartisan grilling Wednesday to the Bush administration’s proposed Microsoft Corp. antitrust settlement, saying it will be difficult to enforce and may stifle competition, not restore it.

Meanwhile, Microsoft urged a federal judge in Washington to impose the administration’s proposal on the nine states that are trying to win tougher terms by pressing the landmark lawsuit.

“The non-settling states are not entitled to any relief on their claims,” the software giant said in a court filing Wednesday.

At the much-anticipated Senate Judiciary Committee hearing, Assistant Atty. Gen. Charles James--who negotiated the Microsoft settlement on behalf of the Justice Department--defended the deal, saying it was the best the government could do in light of a June 28 appellate court ruling that upheld parts of the case and threw out others.

“The case that emerged from the Court of Appeals was much narrower,” James told the committee, echoing the position taken by the software company in recent months.

The Nov. 2 settlement, which drew the endorsement of half of the states involved in the case, prevents Microsoft from retaliating against its rivals and makes it easier for computer makers and software developers to bundle non-Microsoft products into the Windows operating system.

But critics, including California Atty. Gen. Bill Lockyer and eight other states that are pressing for tougher terms, say the settlement is riddled with loopholes.

“I find many of the terms of the settlement to be either confusingly vague, subject to manipulation, or both,” said Sen. Patrick J. Leahy (D-Vt.), who chairs the Senate Judiciary Committee.

Sen. Orrin G. Hatch (R-Utah) expressed similar reservations about the enforceability of the agreement, noting that the Justice Department had to sue Microsoft in 1997 over a dispute about the terms of a previous consent decree with the company.

“Rather than closing the book on the Microsoft inquiry, the proposed settlement appears to be only the end of the latest chapter,” Hatch said.

Hatch said he was particularly disturbed by a letter from former Netscape Chief Executive James Barksdale, whose Internet browser company was nearly destroyed by Microsoft’s anti-competitive behavior.

Barksdale, whose company was eventually bought by Microsoft archrival America Online, warned that the proposed settlement would stifle innovation and enable Microsoft to extend its monopoly into new markets.

“If the [settlement] goes into effect, if will subject an entire industry to dominance by an unconstrained monopolist, thus snuffing out competition, consumer choice and innovation,” Barksdale wrote. He was scheduled to appear as a witness at the hearing but was “uninvited” after Microsoft executives threatened to boycott the hearing if he appeared, sources close to the committee said.

A Microsoft spokesman could not be reached to comment. James told the senators that the proposed settlement was clear and enforceable, accusing critics of exaggerating claims about loopholes.

“So much of what are called loopholes are carve-outs necessary to ensure pro-competitive behavior,” James said.

Though the Senate Judiciary Committee oversees the Justice Department’s antitrust enforcement, the senators have little power to stop or change the proposed settlement, which must be approved by U.S. District Judge Colleen Kollar-Kotelly.

But the hearings serve as a subtle reminder to the judge that congressional leaders are watching closely. In fact, Leahy said he would send the judge a transcript of the hearing “as a courtesy.”

Sen. Jeff Sessions (R-Ala.) objected to sending the transcripts, saying it smacked of “meddling.”

Wednesday’s hearing came to an abrupt end during James’ testimony because of an unrelated Senate matter. The committee vowed to reconvene, but no date was set.

In Microsoft’s court filing Wednesday, the company blasted the proposed remedy plan submitted last week by the nine states including California, saying it “extends far beyond the case that was tried and the liability determinations that were upheld on appeal.”

Among those provisions that Microsoft said exceeded the June 28 ruling were requirements that the company reveal the source code for its Internet Explorer and continue making its Office software for Apple Macintosh computers.

“We stand by our remedy proposals, which are truly fair and effective,” said Iowa Atty. Gen. Tom Miller, who acts as spokesman for the nine state attorneys general.

Kollar-Kotelly had ordered Microsoft to submit its own remedy proposal by Wednesday. In response, the company effectively offered nothing, saying the proposed Justice Department settlement should also be used to resolve the states’ lawsuit.

Now Kollar-Kotelly will need to weigh both the Justice Department settlement and the states’ alternative proposal. Hearings could begin as early as February.