Microsoft deal put pressure on states

Curran: Maryland attorney general says time, absence of U.S. Justice Department led him to approve settlement.

November 14, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

Fortified with takeout coffee and doughnuts, J. Joseph Curran Jr. dialed a 7 a.m. conference call from his home to help decide the course of the nation's biggest antitrust case in a generation.

Some states, particularly Massachusetts, had already made known their distaste for the Justice Department's proposed settlement with Microsoft Corp., the software company found to have intimidated customers and competitors to build a monopoly in the personal computer market.

But Curran, the Maryland attorney general, and several fellow state prosecutors felt the walls closing in on them: The clout of the federal government was gone, the uncertainty of gaining anything more by continuing to fight for two years or more was great and the judge in the case wanted a decision that morning or planned to resume the trial in March. U.S. District Judge Colleen Kollar-Kotelly had told attorneys for Microsoft and the government a month earlier that the terrorist attack of Sept. 11 made settling the case - and healing the economy - priorities.

"When Justice decided to walk away, from a public relations standpoint that was a factor," said Curran, days after the settlement in his downtown office, with a sweeping view of the steeples and smokestacks of East Baltimore. "We'd been doing this now for three years and Microsoft had the capacity for continuing this for another two or three years.

"I felt it was time to begin trusting that they would live up to their word. At least let there be some relief now. The economy needs a bump anyway."

The Microsoft case was considered the most significant case under the 1890 Sherman Antitrust Act since the court carved up the American Telephone and Telegraph Co. in 1984.

The federal government began investigating "Ma Bell" 70 years before the breakup, so the Microsoft case moved swiftly by comparison, yet it struggled to keep pace with advances in the computer industry - another factor that helped persuade Maryland and other states to accept a settlement that no one outside Microsoft and the Justice Department embraced with much enthusiasm.

The rapid changes in technology were illustrated by the fact that government prosecutors initially hoped to corral Microsoft's Windows '98 in 1998 - and ultimately didn't even hamper the recent rollout of Microsoft's Internet-related software called XP.

"They're breaking new ground. Do the old rules of economics and law apply to these new frontiers in cyberspace? How do we apply 19th-century standards to the 21st century? This is not an easy one to see who's wearing the white hats," said R. Lawrence Dessem, a former Justice Department attorney who is now dean of the law school at Mercer University in Georgia.

That's not all that's changed, Dessem said: "We are now in an era where there are many well-paid people who are spinning this and that, and that is a new development. John Rockefeller was not issuing press releases when the government was going after Standard Oil."

Maryland, one of 18 states and the District of Columbia that joined the federal antitrust suit, played a secondary role by its own admission.

"We were on the team on this, but we were not a major player," said Curran, attorney general since 1986.

The fact that Maryland was involved at all speaks to the changing nature during the past generation of state activism in federal antitrust prosecutions.

States gained the legal right to join federal antitrust lawsuits under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Crime-fighting grants at the time provided seed money to create antitrust units. Attorneys general quickly realized that they could gain political capital, and money for their states, by pursuing illegal monopolies.

Maryland's first major antitrust suit was in the late 1980s against insurance companies who conspired to halt potentially costly coverage for businesses and government. Municipal swimming pools were at risk of not opening. A Minnesota ice rink couldn't get a policy to cover its Zamboni machine.

Curran was pressured to drop the suit by USF&G Corp., then based in Baltimore, and by then-Gov. William Donald Schaefer, who feared it would aggravate an "anti-business" perception for Maryland. But Curran stayed in, and the states, after six years in court, won a $36 million settlement and reform of the system.

Curran's style isn't as combative as that of another politician in his family, son-in-law Mayor Martin O'Malley, but the 70-year-old prosecutor has been recognized as a leader in many multi-state lawsuits.

He was the first attorney general to seek punitive damages in the tobacco lawsuit, which generated a total settlement of $206 billion. Several years ago, he chaired the influential antitrust task force of the National Association of Attorneys General, which acts as a sounding board for the states in deciding which cases to pursue jointly.

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