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Settlement talks heating up in Microsoft antitrust case, reports say

By John Fontana
Network World, 03/23/00

The antitrust case that has pitted the government against Microsoft over the past year and a half may finally be coming to a head, according to several sources.

Today reports surfaced that state settlement talks between Microsoft and the Department of Justice may be nearing an end and that a break-up of the company, considered the most severe of penalties, is not being considered.

Spokesmen for both sides would not comment on the reports, calling them premature and an attempt to grab attention.

"There have been strong rumors that this case would reach a conclusion by the end of this month," says Hillard Sterling, a senior litigator with Chicago Gordon & Glickson P.C. Sterling says he believes Microsoft will lose the case if a settlement is not reached and will then file an immediate appeal that would continue the case for many months or even years.

But a settlement could avoid that possibility - The Wall Street Journal and The Washington Post reported that both sides are nearing that conclusion. Settlement talks have been ongoing since Nov. 19, 1999, when trial judge Thomas Penfield Jackson appointed Judge Richard Posner, head of the U.S. Court of Appeals in Chicago, as a mediator in the case.

But Jackson has been growing frustrated, reports say, as the two sides have gone back and forth over terms of an agreement. Settlement talks reportedly have dragged on over breaking up Microsoft into separate companies, a possibility Microsoft CEO Steve Ballmer has called "reckless beyond belief."

Microsoft and the Justice Department Tuesday participated in a closed-door scheduling conference with Jackson, who reportedly said he would delay his ruling if settlement talks were progressing. That meeting reportedly touched off the most recent spirited round of negotiation.

"Jackson has sent solid signals that he is contemplating a severe relief package [penalties], including a breakup," Sterling says. Jackson recently cited the 1911 Standard Oil case in which that company was broken up after it was found to have engaged in anticompetitive behavior.

The Journal and The Post reported that the current round of talks is centered on conduct remedies that would restrict Microsoft's business practices. The Wall Street Journal said the focus is on developing tough restrictions that would prevent Microsoft from using its market power over personal computer makers and software and Internet companies.

It is unclear if the government, which has been said to favor a breakup, will accept those settlement terms. Joel Klein, the antitrust chief at the Justice Department, told the Senate Wednesday that any remedy or settlement must measure up with Microsoft's "serious pattern of anticompetitive conduct." Klein did not rule out a settlement, but said any conclusion to the case must address the Justice Department's concerns.

Some observers contend the two sides may be posturing in order to bolster their own claims that they have made serious efforts to settle before Jackson makes his final ruling, which could come as early as next week.

Jackson issued a preliminary ruling on Nov. 5, 1999, concluding that Microsoft has monopoly power in the operating system market, stifled competition and innovation, and caused "serious and far-reaching consumer harm." Both sides submitted briefs earlier this year detailing their conclusions as to whether any laws were broken in the case and argued their points before Jackson in late February.