To All:
U.S. Says It's Still Open to Microsoft Settlement (Update1)
By James Rowley
Washington, June 8 (Bloomberg) -- Microsoft Corp. could still settle the government's antitrust case outside the court that ordered its breakup by agreeing not ``to abuse its monopoly power,'' the U.S. Justice Department's antitrust chief said.
The government ``is prepared to engage in meaningful settlement negotiations'' to avoid lengthy appeals of yesterday's court order splitting the company in two, said Joel I. Klein, head of the U.S. Justice Department's antitrust division.
Microsoft spokesman Jim Cullinan accused Klein of ``simply posturing with his comments'' and said the company would only be interested in talks that would ``preserve our freedom to innovate and . . . preserve the integrity of our products.''
Klein made his comments to reporters after Jackson exhorted both sides to revive settlement efforts. In an interview with The Washington Post, Jackson said the government and Microsoft should ``swallow their own reluctance to compromise and reach a remedy that both sides, if not elated by, nevertheless are willing to extend.''
While declining to say whether the government would accept a settlement that did not include a breakup, Klein said antitrust enforcers are still open to the idea of an accord.
A settlement that leads to a consent decree would be ``in the interests of the industry (and) it is in the interests of the company,'' as well as the nation, Klein said at a Justice Department briefing.
Klein stressed that any settlement would depend on Microsoft's willingness to ``live by the law'' rather than ``continue to abuse its monopoly power.''
Integration
Any settlement would have to preserve Microsoft's ability to integrate products such as Internet Explorer into the Windows operating system, Cullinan said. Jackson found the company bolted the Web browser to Windows to thwart competition and ordered Microsoft to give computer manufacturers the choice of installing Windows without the browser.
Emphasizing the company's interest in preserving freedom to innovate and protect product integrity, Cullinan said, ``It's clear from the government's proposed remedy and the government's rhetoric that the government is interested in destroying both of those principles.''
Jackson said in a six-page opinion that the two-way split he was ordering ``is perhaps more radical than might have resulted had mediation been successful and terminated in a consent decree.''
Settlement talks under the auspices of a mediator appointed by Jackson last November collapsed three months ago.
Shares of Microsoft fell 1 5/16 to 69 3/16 in afternoon trading on the Nasdaq Stock Market a day after Jackson's order that the software giant be split into a company that makes the Windows operating system and another that makes software applications such as the popular Microsoft Office suite of programs.
Klein said the government would respond in ``due course'' to Microsoft's request that Jackson stay a series of restrictions on the company's business practices, along with the order splitting the software giant in two.
Conduct Restrictions
The restrictions, set to take effect in 90 days, would require Microsoft to disclose portions of the Windows code that enable software programmers to design applications to run on the operating system.
The decree ``will inflict grievous and irreparable harm on Microsoft,'' the company said in a court filing last night.
Speaking in Rotterdam, Microsoft Chief Executive Steve Ballmer said Jackson's order was based on ``numerous factual and legal errors.''
Klein defended Jackson's ruling and his denial of Microsoft's request for more extensive hearings on a remedy as ``a sound exercise of discretion.'' The break-up order flowed from extensive findings of fact and legal conclusions from the 78-day trial, Klein said.
``Judge Jackson has explained that, given his concerns about Microsoft's unwillingness to follow legal requirements, the need for a structural remedy is appropriate,'' Klein said.
The judge found that splitting the company in two instead of just curbing its business practices was necessary because Microsoft ``proved untrustworthy in the past.''
The company ``is unwilling to accept the notion that it broke the law or accede to an order amending its conduct.'' the judge found.
`Particularly Telling'
Klein said it was particularly telling that even after Microsoft signed a 1995 consent decree to settle an earlier government antitrust case it never implemented an antitrust compliance program.
``That reflects its unwillingness to come to grips with the fact that the antitrust laws are a critical piece of the economic mosaic in the United States,'' Klein said.
While the Justice Department will ask Jackson to send Microsoft's appeal directly to the U.S. Supreme Court, Klein said he didn't expect the justices to make a decision on whether to accept the case or turn it over to a federal appeals court for at least several months.
Jackson has invited the government to ask him to certify the case for direct appeal to the Supreme Court under a 1974 law that provides for expedited review of important antitrust cases.
Although the high court has agreed to accept just two cases in the law's 26-year history, ``This seems to me to be precisely the case Congress had in mind,'' Klein said.
Microsoft will likely oppose the request, arguing for review by the U.S. Court of Appeals for the District of Columbia Circuit, Cullinan said. He said the government was trying to ``circumvent and bypass'' the appeals court, which overruled Jackson's 1997 ruling that Microsoft had violated a 1995 consent decree with the Justice Department.
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