Microsoft Settlement Defended as Sufficient

The Justice Department joined hands with former courtroom foe Microsoft Corp. on Wednesday in an effort to convince a federal judge that their proposed antitrust settlement is in the public interest and appropriate for the misdeeds found last year by a federal appeals court.

“We believe that the decree addresses all of the concerns addressed by the Court of Appeals,” Justice Department attorney Philip Beck said during a daylong hearing held in U.S. District Court. “In some aspects, it has gone well beyond that.”

Beck and attorneys for the software giant also maintained that the government didn’t have the authority to end Microsoft’s monopoly, a position that has been challenged by nine states that refused to sign the deal.

U.S. District Judge Colleen Kollar-Kotelly said she disagreed as well, a potentially serious setback to Microsoft’s attempt to derail a separate case brought by those nine states. She said that when the appeals court rejected a breakup as too strong a remedy, it wasn’t rejecting other alternatives.

The appeals court found that Microsoft illegally acted to protect its monopoly in a dozen ways, trying to kill off potential threats, including Netscape’s Web browser and the Java programming language.

The proposed settlement requires standard pricing for Windows, forbids Microsoft from discriminating against computer companies that include other firms’ software and mandates more disclosure from Microsoft about how Windows works with other programs.

Taken as a whole, those terms “go beyond those that we would likely have obtained had we litigated,” Beck said. “It would have been an uphill battle that likely would have been resolved against us.”

Several trade groups, however, said the proposal fell short of what would be required to keep Microsoft from engaging in predatory behavior by extending its monopoly on desktop computer operating systems into new markets.

Donald Flexner, a lawyer representing SBC Communications Inc., said the settlement needed tougher remedies to prevent Microsoft from smothering more “baby threats in the crib.”

The settlement “lets Microsoft run wild,” agreed former appellate Judge Robert Bork, who represents a coalition of Microsoft’s opponents.

Microsoft attorney John Warden described such criticism as “whining” and he said the trade groups who were questioning it wanted “a grab bag of personal advantages for Microsoft competitors.”

Kollar-Kotelly didn’t indicate when she would rule on the proposed settlement’s fairness--the primary purpose of Wednesday’s so-called Tunney Act hearing.

“I have a lot of work ahead of me before I make this decision,” she said from the bench. In addition to Wednesday’s testimony, Kollar-Kotelly has about 30,000 comments from the public to sift through, most of them opposed to the deal.

Even if Kollar-Kotelly approves the pact, she still must hear at least five weeks of arguments, beginning Monday, on the nine states’ request for harsher remedies.

The remedies, backed by California, Iowa and other states, would require Microsoft to release the source code for its Internet Explorer Web browser and produce a “modular” version of Windows so computer makers can strip out Microsoft’s browser, video player or other pieces if they choose to.

The judge raised several concerns through the hearing, but gave little indication where she stood on the overall fairness of the settlement.

Kollar-Kotelly asked whether Microsoft had disclosed all of its lobbying contacts with the government, as required by federal law. She expressed interest in finding out more details after learning that Microsoft attorney Charles “Rick” Rule--who formerly worked in the Justice Department’s antitrust division--may have been a registered lobbyist when the settlement was being worked out.

Warden said, “There was no discussion with a member of the legislative branch about any term of the consent decree. Were there discussions about whether we were trying to settle the case? Almost certainly.”

Kollar-Kotelly also questioned whether the government had adopted too narrow a definition of “middleware” in the agreement.

Middleware, including browsers, media players and instant-messaging software, sits between the operating system and smaller programs.

Such middleware plays an important role in the settlement deal because if properly protected, it could serve as a threat to Microsoft’s operating system monopoly.

The court of appeals already had issued its own definition of middleware.

“I want to know whether you are taking a different approach, and if so, I want to know why,” Kollar-Kotelly said.