Microsoft offers to curtail practices

Proposal falls short of breaking up firm to settle antitrust suit

March 25, 2000|By NEW YORK TIMES NEWS SERVICE

WASHINGTON -- With two federal judges pressing Microsoft and the government to settle their antitrust case soon, Microsoft presented a formal, written proposal yesterday that would restrain some of the company's business practices, officials said.

It was unclear what was fully contained within the proposal, which was described as technically complicated. Government lawyers carefully reviewed the offer until late last night, then decided the proposal did not merit flying to Chicago today, said the sources, who spoke on condition of anonymity.

The government was expected to ask Microsoft through the weekend to clarify some of its proposals. Face-to-face discussions still could take place tomorrow or Monday.

The Dow Jones news service, citing anonymous sources, reported late yesterday that Microsoft agreed to separate its Internet browser software from its dominant Windows operating system.

ABC News, also citing an anonymous source, said Microsoft agreed to government oversight of some of its business practices but not to limits on what features or functions it could add to its Windows software.

ABC also reported Microsoft was offering to consider releasing prized blueprints of some of its software code but insisting it not be required to admit that it violated the law.

Reaching agreement with Microsoft is only half of the plaintiffs' task. They must also agree among themselves.

The Justice Department and the attorneys general of 19 states are partners in the suit, and among them they hold a range of opinions on what they could accept as a settlement.

Some attorneys general believe that anything short of breaking up the company would be ineffective, while others disagree.

But officials said proposals that would restructure the company have not been on the table during the settlement talks.

Judge Thomas Penfield Jackson, who is trying the case in federal court here, called lawyers from both sides to his chambers Tuesday to ask for a progress report on the settlement talks, which have been under way since Nov. 30.

The trial is over; all that is left is the verdict.

But Jackson is withholding it to give the settlement talks time to run their course. On Tuesday, however, he made it clear that he was not willing to wait beyond next week.

Given his findings of fact in the case, published in November, he is almost certain to find Microsoft in violation of antitrust law -- prompting the company to offer concessions yesterday that officials said the company had not offered before.

Richard Posner, chief judge of the U.S. Court of Appeals in Chicago, who is serving as mediator, has been making similar suggestions of urgency for weeks.

Originally he asked to conclude the talks by early February.

Since the meeting with Jackson this week, state and federal officials have been furiously calling, e-mailing and meeting each other in an effort to agree on a strategy.

But as the attorneys general consider Microsoft's proposal, the states have no central process for deciding whether it warrants serious negotiation, requiring lots of phone calls and messages to reach a decision.

Thursday, after reports in the Wall Street Journal and the Washington Post indicated that the pace of settlement talks had increased, Microsoft's stock gained more than 7 percent.

Yesterday it closed at $111.6875, down 18.75 cents.

Both state and federal officials said publicly that they would not comment on the settlement talks, and none would describe the proposal in detail. Microsoft declined to comment.

But all of them appear to be keeping their options open to meet in Chicago with Posner this weekend for talks. If government lawyers decide Microsoft's new proposal is serious, Bill Gates, Microsoft's chairman, and Klein might be expected to join the talks.

Several officials noted, however, that it was not easy to make a decision because of the technical detail in the proposal.

The last time Microsoft and the government settled an antitrust case, in 1994, Gates insisted on one detail -- the ability to add new features to Windows -- that seemed unimportant to the government at the time. It later proved to be the basis for the current suit.

"Our experience with this is not a happy one, not inspiring of confidence," one official said.

Several officials said it would take time to analyze the document to make sure it does not include similar potential problems.

All of Microsoft's proposals, they said, are for changes in conduct. The company has made it clear, in the settlement talks and in public, that it would not accept a breakup of the company.

Breakup proposals, the company has said, are "an extreme and reckless resolution to the government's antitrust suit."

But some government officials think anything short of that would not be effective.

As one official put it yesterday: "If we don't make fundamental changes, then soon enough we'll be fighting this battle all over again."

Other officials say they do not believe Jackson would accept a structural remedy.

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