Nine states and the District will pursue tougher penalties against Microsoft Corp. rather than endorse a settlement agreement that would end the antitrust case against the company.
Nine other states including Maryland yesterday joined the Justice Department and will settle with Microsoft in return for its willingness to agree to a broad range of restrictions on its business practices.
Also yesterday, U.S. District Judge Colleen Kollar-Kotelly officially ended the period of mediation she ordered last month.
The state attorneys general and attorneys for the Justice Department and Microsoft met twice in court with Judge Kollar-Kotelly yesterday, her deadline for reaching a mediated settlement that would prevent hearings next year on how to punish the Redmond, Wash., software developer for violating antitrust laws.
But long negotiations, which attorneys said lasted through the night, failed to end the ongoing antitrust case.
California, Connecticut, the District, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia did not agree to the proposed settlement.
“We still have some concerns,” Iowa Attorney General Tom Miller said.
Mr. Miller said the states want to pry more concessions from Microsoft to ensure that its competitors aren’t quashed.
Neither Mr. Miller nor Connecticut Attorney General Richard Blumenthal ruled out further meetings to seek a mediated settlement, but they said they are preparing for more litigation.
Microsoft attorney John Warden seemed as skeptical that mediation would bridge the gap separating the company and its remaining opponents.
“The issues in this case have been beaten to death, and they have been beaten to death by people who are worn out,” Mr. Warden said.
New York Attorney General Eliot Spitzer said his state and eight others decided to bow out of the case after making changes to the settlement agreement hammered out by Microsoft and the Justice Department because all sides agreed to clarify several points in the document.
The federal government and Microsoft agreed to submit the revised settlement to Judge Kollar-Kotelly to replace the original document they came up with last week. Philip Beck, an attorney hired to represent the Justice Department, said the differences between the two agreements are minor.
Microsoft co-founder Bill Gates said in a statement yesterday he agreed to change the proposed settlement agreement to address the concerns of some states that appeared willing to settle the lawsuit. He also encouraged the remaining states to endorse the proposal.
Illinois, Kentucky, Louisiana, Maryland, Michigan, Ohio, New York, North Carolina and Wisconsin preferred to settle with Microsoft rather than continue with the lengthy legal fight.
Mr. Spitzer said he bowed out of the fight knowing other state attorneys general may be able to secure more concessions, but confident he has helped restore competition.
“We have done this knowing that no settlement is ever perfect,” Mr. Spitzer said.
Michigan Attorney General Jennifer M. Granholm said the further litigation may not help consumers.
“The benefits of continuing prolonged litigation against Microsoft do not outweigh the potential disadvantages,” she said.
Judge Kollar-Kotelly said the case will proceed on two separate legal paths. One will determine whether the revised settlement agreement is in the public interest. Those hearings are required under the Tunney Act.
Separately, the judge will hold hearings on the remaining states’ pursuit of tougher sanctions on Microsoft. The judge said the states must file their proposed penalties with the court by Dec. 7.
Mr. Warden said in a court filing yesterday that states that don’t sign onto the settlement agreement should not be allowed to continue with litigation. They should be forced to voice their objections in hearings that will determine whether the settlement is in the public interest.
Mr. Blumenthal said the states have enough money to fund the litigation. The lawsuit began in May 1998 and stems from charges that Microsoft violated a 1995 agreement with the Justice Department.
“We are very confident that there will be sufficient resources to continue,” he said.
Under the terms of the settlement, Microsoft must provide rivals with information sufficient to let them make software compatible with Microsoft’s Windows operating system.
The settlement also is intended to give computer makers more latitude to place software from Micro-soft competitors on computers without facing reprisals from the computer giant.