The legal drama is not quite over–the 18 state attorneys general engaged in parallel litigation against Microsoft are still pondering whether to endorse the settlement–but when Assistant Attorney General Charles James signed the agreement at 7 on Friday morning, the four-year case finally seemed on the way to evaporating. Both parties professed satisfaction. “The settlement is fair and reasonable,” said Gates. Attorney General John Ashcroft called it “the right result… a very strong settlement.” Here’s a quick review of what the settlement includes.
Contract practices. Microsoft must offer standard terms for computer makers and licensees, and is prevented from retaliating against competitors or those who ally with them.
Nonpreferential treatment. A more-level playing field for competitors with “middleware” software (like Real Network music player or AOL Instant Messenger) which runs on top of Windows. Also, Microsoft would no longer be able to dictate to computer makers which icons must be placed on the starting screen or which programs would be included under the “start” menu.
Information sharing. Microsoft must give software developers information about software hooks that will allow their programs the same access to Windows enjoyed by Microsoft’s own programs.
Enforcement. A three-person technical committee will make sure Microsoft lives up to the five-year agreement. A serious violation will extend the terms for two years.
What wasn’t in the settlement agreement? A limitation on what Microsoft can and can’t put in Windows. A forced turnover of Microsoft source code to competitors. An admission by Microsoft that it had behaved like an illegal monopolist.
Competitors called the settlement a sellout. “It doesn’t even qualify as weak–it’s pointless,” says Sun Microsystems general counsel Michael Morris. AOL Time Warner released a statement charging that the settlement “does too little to promote competition and protect consumers, and can too easily be evaded by a determined monopolist like Microsoft.” Real Networks called the proposal “a reward, not a remedy.”
James is unfazed. “Competitors see [the case] as a platform for obtaining their own form of relief,” he says, an interesting criticism considering that the case originated when the DOJ acted on the complaints of those competitors. He also shrugs off the fears shared by Microsoft’s rivals that the proposal is written in ambiguous, loophole-laden language that Microsoft might use to avoid concessions. “The compliance measures are extraordinary,” says James.
In any case, James has more than fulfilled the wishes of Judge Colleen Kollar-Kotelly, who in the last month–explicitly citing the stress in the post 9-11 economy–strongly urged a settlement, and set the parties for round-the-clock sessions before mediator Eric Green. While some suspicion lurks that the Bush administration’s probusiness policies dictated a precipitous settlement (something James unequivocally denies), it seems that James simply came to see the case the way Microsoft did. By that thinking, the key to last June’s court of appeals decision was not the clear condemnation of Microsoft’s monopoly practices that dominated the ruling, but the rejection of other counts where the judge, Thomas Penfield Jackson, found Microsoft culpable. Many believed that if the case had continued, the next phase–finding a remedy for Microsoft’s misbehavior–would have dictated deep changes in its practices, perhaps even have required extensive redesign of just-released Windows XP. “I think the evidence for how Microsoft has consolidated its market position in the last four years would have been overwhelming. [If the case had continued]… the department would have gotten a better result,” says David Frederick, who argued the DOJ’s case before the appeals court. (He is now in private practice.) But since James agreed with Microsoft that the case had considerably narrowed, he thought that a less sweeping settlement was appropriate.
Whether or not the state attorneys general will agree is another matter. Significantly, the usually hawkish rhetoric of the A.G.s has been noncommittal. “You have to look at the whole thing, and that’s what we’re doing,” says Iowa’s Tom Miller. One senses that their appetite for carrying on the fight without the Feds is limited; they may want to focus on getting a role in the enforcement process, to make sure Microsoft honors the spirit of the agreement.
But it’s increasingly unlikely that anything that the states do will change a reality that the DOJ has endorsed and that Bill Gates’s competitors now ruefully understand: when the last lawyer leaves the courtroom, Microsoft will continue to be as powerful an industry force as it ever was. “The Microsoft case has had its own mythology, a lot of which doesn’t apply [to the actual issues],” says James. The great legal issues of the cyberage will have to wait for the next “case of the century.”
