- The Washington Times - Friday, November 2, 2001

State attorneys general yesterday reviewed a proposed settlement reached by Microsoft Corp. and the Justice Department, but reportedly have not decided whether to endorse the agreement and could ask for time to examine the deal when they meet in court today.

Approval from the 18 states that joined the federal government in suing Microsoft for antitrust violations would end the three-year antitrust suit against the Redmond, Wash., company.

But the states have long supported punishment that includes breaking Microsoft into two companies. The states could decide to pursue litigation against Microsoft on their own if they don't like the tentative settlement the Justice Department negotiated.

"The states have their own perspective on what a final settlement should look like," said a source familiar with the talks.

Charles James, head of the Justice Department's antitrust division, outlined the proposed settlement Wednesday for the states, which were not part of the settlement negotiations.

Microsoft officials declined to confirm they reached a tentative agreement to end the lawsuit.

"We are still working hard to achieve settlement," Microsoft spokesman Jim Deslar said.

Shares of Microsoft rose 6.3 percent yesterday on Nasdaq, closing at $61.84 per share, up $3.69 a share.

Investors said a settlement is good news for Microsoft.

"We don't know the nature of the settlement or if the states will go along, but it's a fairly positive reaction from the market. It's almost a best-case scenario from Microsoft's perspective," said Steven Appledorn, senior portfolio manager at Birmingham, Mich., money manager Munder Capital Markets.

Iowa Attorney General Tom Miller and Connecticut Attorney General Richard Blumenthal, both of whom helped lead the states' legal fight, were in Washington for briefings with the Justice Department and continued talks yesterday with top state officials opposing Microsoft.

Attorneys for the Justice Department, the states and Microsoft are due in court this morning to give U.S. District Judge Colleen Kollar-Kotelly an update on the progress toward ending the antitrust suit. The judge forced all sides on Sept. 28 to make a renewed effort to settle the lawsuit, and three weeks ago she appointed Boston University law professor Eric D. Green to mediate talks.

She ordered the parties involved in the suit to reach a settlement by today. Barring settlement, the penalty phase in the case would begin in March. Not only do the states want strict penalties against Microsoft, but last week they hired trial lawyer Brendan Sullivan, signaling that they may be prepared to forge ahead with litigation.

U.S. District Judge Thomas Penfield Jackson found Microsoft guilty of violating the Sherman Antitrust Act last year and ordered the company split in two.

An appeals court in June upheld his finding of antitrust violations but overturned his breakup order, citing subjective comments he made during the trial. The court said the case must be reviewed by the lower court, and on Aug. 24 picked Judge Kollar-Kotelly to hear the case.

Under the terms of the settlement that the Justice Department and Microsoft reportedly have agreed to, Microsoft would agree to abide by certain restrictions for five years. The restrictions could be extended two more years if Microsoft violates them.

The settlement would require Microsoft to disclose some of its source code, the instructions that run its Windows operating system, which runs more than 90 percent of all personal computers.

Computer makers also could remove Microsoft icons from the desktop, the first screen consumers see when they turn a computer on.

Microsoft opponents were enraged by the proposal.

Ed Black, president of the technology industry group Computer and Communications Industry Association, said the deal will let Microsoft continue its anti-competitive ways.

"To say we are troubled by the published accounts indicating that the Justice Department is selling out consumers, competition and innovation would be an understatement," Mr. Black said.

The Consumer Federation of America and the Consumers Union urged state attorneys general to reject the settlement.

Others were enthusiastic the lawsuit could end soon.

"A reasonable settlement would be in the best interest of everyone the technology industry, the economy and especially consumers," said Jim Prendergast, president of the D.C. trade association Americans for Technology Leadership, a group founded by Microsoft in 1999.

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