Justice Offers Tepid Support for States Against Microsoft

The Justice Department says nine states can pursue the case but shouldn't undermine its settlement.

Author:: Ronna Abramson
Publish date:: Apr 15, 2002 8:03 PM EDT

The Department of Justice said Monday that although it has settled its antitrust case with

Microsoft

, the nine dissenting states seeking tougher sanctions have the right to continue their fight.

But walking a fine line in a brief filed Monday afternoon, the department also warned that tougher sanctions that conflict with or undermine the settlement it has reached with the company "endanger our practical system of coordinated national antitrust enforcement."

In the 32-page brief, the DOJ waffles, arguing for the dissenting states' rights while taking a critical stand on the tougher sanctions being fought by those states.

"I think it's pretty timid," said Ernest Gellhorn, a law professor at George Mason University in Arlington, Va. Sounding more like philosophers than advocates, the DOJ attorneys say there's no authority here or there but decline to take a strong stand, he said.

Noting that the dissenting states go beyond the settlement by asking for penalties that extend into new products and markets, the department said the court "may inquire" whether a small group of states are the best parties to obtain relief of such broad reach and implication. The department says the relief being sought by the dissenting states "may harm consumers, retard competition, chill innovation or confound compliance" with the proposed settlement.

U.S. District Court Judge Colleen Kollar-Kotelly asked the Department of Justice to file the friend-of-the-court brief on whether the dissenting states have a right to seek harsher penalties now that the federal government has agreed to settle the antitrust case against Microsoft. The request came in response to a Microsoft motion to dismiss the antitrust case still being fought by the nine states.

In June, the U.S. Court of Appeals found that Microsoft had illegally maintained a monopoly in computer operating systems and remanded the case to the lower court to figure out how the company should be penalized. After months of haggling, Microsoft settled the case in November with the Justice Department and half of the 18 states that were pursuing it, though that settlement is now up for federally mandated public and judicial review.

The attorneys general for nine states, led by Iowa and California, and the District of Columbia have called for stricter penalties against Microsoft than those in the proposed settlement. They want Microsoft to offer an alternate version of its Windows operating system without "bundled" software programs such as Windows Media; to ensure that its Office software is compatible with non-Windows systems; and to include the Java programming language in Windows XP.

The judge's request for the DOJ to weigh in put the Bush administration in a tricky spot, arguing for states' rights -- a mainstay of the Republican agenda -- on the one hand but also defending its settlement on the other. Twenty-four states not involved in the antitrust case filed friend-of-the-court briefs supporting the dissenting states' right to continue with the case.

The Bush administration's Justice Department wrote, "Under existing law, the non-settling states may pursue relief in their separate case." But Microsoft, in seeking to dismiss the dissenting states' case, does "raise jurisprudential and policy issues that are unquestionably important," the DOJ said.

When Microsoft filed its motion to dismiss the nonsettling states' case Feb. 26, the company said the Department of Justice has the exclusive authority to enforce antitrust law. A few states should not be able to seek different remedies, the company said.

The DOJ filing came in the middle of hearings on the tougher sanctions being sought by the dissenting states. The states' last witness appeared in court Monday. Now Microsoft will call a string of witnesses, including Chairman Bill Gates and CEO Steve Ballmer, to make its case against tougher sanctions.

In a separate proceeding, under the Tunney Act, Kollar-Kotelly is reviewing the proposed settlement between Microsoft and the Justice Department to determine if it is in the public interest. A decision finding that the settlement is in the public interest would weigh on the nonsettling states case, the DOJ said Monday.

After closing of 24 cents to $55.69, shares of Microsoft rose 57 cents, or 1% in after-hours trading.