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Microsoft foes find fault, vow to fight

http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&gui...

By CBS.MarketWatch.com
Last Update: 3:43 PM ET Nov. 2, 2002

SAN FRANCISCO (CBS.MW) -- Microsoft's most bitter foes aren't giving up despite Friday's antitrust remedies ruling.

U.S. District Judge Colleen Kollar-Kotelly accepted on Friday most provisions of the antitrust settlement agreement between Microsoft (MSFT: news, chart, profile) and the U.S. Justice Department. Microsoft called the settlement it reached with the federal government last year a "tough, but fair compromise." See full story.

Microsoft's most vocal competitor Sun Microsystems (SUNW: news, chart, profile) was blunt with its criticism of a settlement it considers short-sighted and unenforceable. One provision of the judge's ruling called for three of Microsoft's outside directors to oversee the settlement, rather than three independent overseers not connected to the company, as set by the original pact with Justice.

"The weak steps that Microsoft has taken to comply with the requirements already show that the settlement will be ineffective in curbing Microsoft's monopolistic and anti-competitive practices and how difficult it will be to enforce, quite apart from the propriety of having Microsoft's own board members be the first line of compliance enforcement," said Sun Special Counsel Michael Morris.

In addition to conditionally approving the federal settlement, Kollar-Kotelly rejected virtually all of the tougher sanctions proposed by nine states that had dissented from the agreement. The holdout states, led by Iowa, California and Connecticut, said Friday that they were weighing whether to appeal. See story on the judge's ruling.

Morris urged them to do so. Sun will also press ahead with its own civil case against the Redmond, Wash.-based company. AOL Time Warner (AOL: news, chart, profile), owner of the Netscape Web browser, is also waging a legal battle against Microsoft.

Past clashes

The federal government and 19 states originally filed suit against Microsoft in May 1998, charging that the firm had used its monopoly on computer operating systems to stifle threats to the dominance of Windows.

A key element of the case were allegations Microsoft used Windows as both a carrot and a stick to persuade computer makers and others to favor the company's Internet Explorer browser over the once-dominant Navigator browser made by Netscape. Microsoft was accused of using the tactics to thwart Sun's Java programming language.

A federal appeals court last year upheld a ruling that Microsoft took illegal steps, including those aimed at Navigator and Java, to maintain its Windows monopoly. If Microsoft hadn't engaged in those acts, Navigator and Java could have together evolved into a competitive threat to Windows, the court found.

The court threw out two other lower court findings and tossed an order to split Microsoft in two. The case was then sent back to U.S. District Court, where Kollar-Kotelly was chosen to fashion a new remedy.

Procomp, an industry trade group involving Sun, as well as Corel (CORL: news, chart, profile) and Oracle (ORCL: news, chart, profile), issued its own rebuke of Friday's decision. "This was the moment in time when competition could have been restored; that task will be much more difficult in the future," said ProComp president Mike Pettit.

And in the heart of Silicon Valley, the media was livid.

San Jose Mercury News tech columnist Dan Gillmor said the deal and its approval gave "an unashamed lawbreaker all the room it needed to stick to tried-and-true anticompetitive tricks."

"If Friday's decision represents the latest in antitrust law, the consequences are unfortunate for innovation," wrote Gillmor. "It means, for all practical purposes, that antitrust law can't have any serious impact in a business that changes rapidly. There's no effective way to deal with lawbreaking by tech-industry predators if you can only look back, not ahead."

In a news analysis for the New York Times, senior writer Steve Lohr said not much has changed for Microsoft since the original antitrust case was levied in 1998 and the company isn't likely to be slowed down by Friday's ruling.

A report by the Associated Press noted that Microsoft's inclusion of a "Service Pack" in the latest versions of the Windows operating system buries a tool that allows users to make non-Microsoft applications preferred tools on the desktop. Critics says this is just one example of how Microsoft is not fully complying with the spirit of the law.

AOL Time Warner has been a vociferous critic of how Windows XP fails to allow users to uninstall the default media player from Microsoft. That link to media -- and the advertising and marketing connections it enables -- remains a bone of contention.

Another issue concerns Microsoft's inclusion of Sun's Java software and then Microsoft's decision to stop supporting Java in 2004.

The .Net platform now being developed by Microsoft is in a developing conflict with Java applications, so failure to support Java on PC desktops would, say rivals, give Microsoft a leg up in business software, especially if e-commerce takes hold.

Sun filed suit in March over the Java issues. In Baltimore, federal Judge J. Frederick Motz presides over that and three other cases involving Web browsers, handheld computer operating systems and alleged violation of patents. Motz's court is also the venue for about 100 consolidated class-action antitrust suits against Microsoft, with a hearing scheduled later this month.