Microsoft Talks Break Down; Federal Judge Overseeing Effort Quits
Saturday, April 1, 2000 06:44 PM ET
NEW YORK -(Dow Jones)- Talks between the federal government and Microsoft Corp. have broken down as the federal appeals court judge appointed to try and broker a settlement of the government's antitrust action against Microsoft said Saturday he is ending his effort because of both sides' "deep-seated" disagreements, the Associated Press reported.
"After more than four months, it is apparent that the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged," Judge Richard Posner said in a statement, according to the AP.
Chicago-based Posner added he won't make any public or private comments on the merits of the litigation or on the negotiating positions of the parties involved.
Microsoft (MSFT, news, msgs) Chairman Bill Gates said, "It's unfortunate that a settlement wasn't possible. Microsoft certainly went the extra mile." He also noted the company spent more than 3,000 hours on the settlement effort the last four months and that Microsoft had offered "significant concessions."
Later in a conference call, Gates reiterated that he believes the company has a strong legal case and dismissed suggestions that the breakdown of talks represented a "corporate death penalty" for Microsoft.
"We are long-term players in the judicial process," said Bill Neukom, Microsoft executive vice president and general counsel.
In Washington, Joel I. Klein, the assistant attorney general in charge of the Justice Department's antitrust division, thanked Posner for his work.
"We would have preferred an effective settlement to continued litigation," Klein said. "But settlement for settlement's sake would be pointless."
He also said if U.S. District Court Judge Thomas Penfield Jackson, who is presiding over the 2-year-long case, issues a ruling favorable to the company, "We will seek a remedy that prevents Microsoft from using its monopoly in the future to stifle competition, hamper innovation and limit consumer choice."
The prospects of a settlement had brightened for a time last week, after Microsoft faxed a detailed proposal to government lawyers March 24 in a bid to settle the landmark antitrust case after the trial judge warned he would deliver his verdict March 28 if progress wasn't made in settlement talks.
That proposal, which reportedly included promises to separate the company's Internet browser software from the Windows operating system and allow rivals to embed software in Windows, was apparently viewed skeptically by government lawyers and as inadequate, the AP reported Monday.
Tuesday, Jackson postponed his verdict until April 7 to give both sides more time to hammer out details of a possible out-of-court settlement.
At issue is a lawsuit filed by the federal government and 19 states alleging that Microsoft repeatedly engaged in illegal anti-competitive behavior by using monopoly power.
Jackson agreed with nearly all the allegations in initial findings in November. Jackson, who has pushed both sides to settle, warned lawyers he would announce his final ruling as early as last Tuesday if they failed to make significant progress toward reaching a settlement.
Microsoft officials, including Gates, negotiated with government attorneys just days before the Justice Department filed its original complaint in 1998. An agreement appeared likely until government lawyers complained that Gates reconsidered details in an offer he made. The deal fell through, and the government filed suit.
Once Jackson issues a verdict, he would have to hold additional hearings to determine what kind of sanctions to impose.
Gates, who gave up his chief executive position last year to Steve Ballmer, has repeatedly insisted the company he co-founded in 1975 remain intact. Gates and Ballmer have vehemently disagreed with the judge's findings and have said that Microsoft is likely to appeal if it loses. Doing so
Microsoft has signaled it is ready to accept a far-reaching conduct settlement and prepared to offer more concessions.
The Wall Street Journal reported last week that prosecutors opened the door to a possible compromise by agreeing not to seek a "structural remedy" which would entail breaking up Microsoft into a series of "Baby Bills" to punish it for monopolistic business practices.
People close to the case told the Journal that the sides were focusing on developing tough restrictions on Microsoft's conduct, not on restructuring or dividing the software giant.
The Journal reported Thursday that Ballmer told employees Microsoft will make further "substantial" offers in settlement negotiations.
"We have made, and will continue to make, substantial proposals to settle this case," Ballmer wrote in an e-mail sent Monday to most of Microsoft's 33,000 employees. He said the company's five top executives, including Gates, are involved and are working "hard and creatively" to forge an agreement, the Journal reported.
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