California Bar Journal
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Microsoft settlement fails California
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Bill LockyerIn the Wild West, mavericks and adventurers made their mark through imagination, boldness and innovation. But even in the Wild West, there was a sheriff and a judge to enforce the law and ensure fair play on the frontier.

The Microsoft antitrust case is about applying laws to the new frontiers of hi-tech. Its outcome will affect a new American economy driven by information and technology. That is why California, eight other states and the District of Columbia are now fighting for tough, enforceable remedies to end Microsoft's illegal business practices that have unfairly stifled competition, harming business and consumers.

The decision to pursue tough remedies was made after careful review of the federal government's proposed settlement with Microsoft. The federal settlement simply has too many loopholes and falls far short of restoring competition and innovation to the computer software industry so important to California and our nation. Taken as a whole, the settlement simply does not offer the people, the states or the federal government the promise of reform we earned when the courts found Microsoft guilty.

Every court that has heard this case has found that Microsoft illegally maintained its monopoly in PC operating systems, crushing competitors and innovation along the way. While admiring the genius that went into inventing and marketing Microsoft Windows and other Microsoft software, I cannot settle for allowing the company to continue breaking the law by illegally suppressing competition and suffocating innovative emerging technologies. When one business breaks the law, their competitors who do play by the rules are hurt, and they have every right to demand and expect that the government will bring the lawbreaker to justice.

Moreover, the Court of Appeals said that remedies in this case "must seek to unfetter a market from anti-competitive conduct, to terminate the illegal monopoly, deny the defendant the fruits of its statutory violation, and ensure that there remain no practices likely to result in monopolization in the future." The federal deal fails on all of these points.

The federal settlement would allow Microsoft to control the scope of its own remedy through convoluted definitions of "middleware" that would make it possible for the company to do the same things tomorrow that courts have found unlawful in the past. Indeed, a key definition in the deal "shall be determined by Microsoft in its sole discretion." The settlement also would allow Micro-soft to continue to pay off companies for not using competing software in the form of market development agreements. For computer makers with razor-thin margins, this means that software competitors will not be allowed to compete on the desktop, thus fixing the game so they can't play.

While the deal requires Microsoft to disclose some of the interfaces needed by competitors so that their products can be made Microsoft-compatible, the information is too limited and too late to allow real competition against Microsoft's own products. The term of the agreement is too short, providing the company with incentives to drag its feet when complying with the proposed decree.

The remedies now being sought by the states would fix what's wrong with the proposed settlement.

They would, among other things, extend the term of the agreement to 10 years and require that Microsoft disclose the necessary technical information so that handheld devices, servers and networks can work with Windows, with such information available early enough so that rival software developers have a fair shot to compete. To prevent further unlawful commingling of Internet Explorer with the Windows Operating System, and prevent similar anticompetitive commingling of other products such as multimedia video and audio software or electronic e-mail software, the remedies would require Microsoft to offer its operating system software on an unbundled basis.

To assist the court in settling disputes and monitoring Microsoft's compliance, enforcement would be handled by a special master, rather than by a technical committee that is barred, under the federal settlement, from reporting even the most egregious violations to the trial court.

Microsoft business practices need fixing. The free market, not Micro-soft, should decide the fate of emerging technologies. Computer users deserve to have a real choice among programs, and software developers should have a fair chance to capture the imagination of consumers with innovative products. Requiring that Microsoft abide by antitrust laws through enforceable remedies will provide fair competition in a free market - which is good for business and good for consumers.

Bill Lockyer is the attorney general of California.