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Originally published June 10, 2007 at 12:00 AM | Page modified June 28, 2007 at 4:14 PM

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In Microsoft's corner: Justice Dept.

The Bush administration view of antitrust regulation has been a boon for the software giant, but it has raised some legal eyebrows.

The New York Times

WASHINGTON — Nearly a decade after the Clinton administration began a landmark effort to break up Microsoft, the Bush administration has adopted a different course by repeatedly defending the company in the United States and abroad against accusations of anti-competitive conduct, including the recent rejection of a complaint by Google.

The shift reflects a different view of antitrust policy and a recognition of major changes in the marketplace. The battlefront among technology companies has shifted from computer-desktop software, a category Microsoft dominates, to Internet-search and Web-based software programs that allow users to bypass products made by Microsoft, the world's largest software maker.

In the most striking recent example of the policy shift, the top antitrust official at the Justice Department last month urged state prosecutors to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft's behavior.

Google accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google's desktop-search program, lawyers involved in the case said.

The Justice Department official, Assistant Attorney General Thomas Barnett, had until 2004 been a top antitrust partner at Covington & Burlington, the law firm that has represented Microsoft in several antitrust disputes.

At the firm, Justice Department officials said, he never worked on Microsoft matters. Still, for more than a year after arriving at the department, he removed himself from the case because of conflict-of-interest issues. Ethics lawyers ultimately cleared his involvement.

Barnett's memo dismissing Google's claims, sent to state attorneys general around the nation, alarmed many, they and other lawyers from five states said.

Some state officials said they thought Google's complaint had merit. They also said they could not recall receiving a request by any head of the Justice Department's antitrust division to drop any inquiry.

Barnett's memo appears to have backfired, state officials said. Prosecutors from several states said they intended to pursue the Google accusations with or without the federal government.

In response, federal prosecutors are discussing with the states whether the Justice Department will join them in pursuing the Google complaint.

The complaint has not been made public by Google or the judge overseeing the Microsoft consent decree, Colleen Kollar-Kotelly, of the U.S. District Court in Washington. It is expected to be discussed at a hearing on the decree this month.

The memo illustrates the political transformation of Microsoft and the shift in antitrust policy between officials appointed by President Clinton and by President Bush.

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"With the change in administrations there has been a sharp falling away from the concerns about how Microsoft and other large companies use their market power," said Harry First, a professor at the New York University School of Law and the former top antitrust lawyer for New York state who is writing a book about the Microsoft case.

Ricardo Reyes, a Google spokesman, declined to comment about the complaint.

Bradford Smith, general counsel at Microsoft, said the company was unaware of Barnett's memo. He said Microsoft had not violated the consent decree and it had modified Vista in response to concerns raised by Google and other companies.

He said the new operating system was carefully designed to work well with rival software products, and an independent technical committee that works for the Justice Department and the states had spent years examining Vista for possible anti-competitive problems before it went on sale.

He said that even though the consent decree did not oblige Microsoft to make changes to Vista in response to Google's complaint, Microsoft lawyers and engineers had been working with state and federal officials in recent days in search of an accommodation.

"We've made a decision to go the extra mile to be reasonable," Smith said.

Microsoft was saved from being split in half by a federal appeals-court decision in 2001.

The ruling found that the company had repeatedly abused its monopoly power in the software business, but it reversed a lower-court order sought by the Clinton administration to split up the company.

Bush administration officials who thought the Clinton administration had overreached in the case then promptly settled it.

Microsoft's critics and competitors said the settlement did not contain enough restrictions on the company to prevent it from using its market power to reduce competition.

Google complained to federal and state prosecutors that consumers who try to use its search tool for computer hard drives on Vista were frustrated because Vista has a competing desktop-search program that cannot be turned off.

When the Google and Vista search programs are run simultaneously, their indexing programs slow the operating system considerably, Google contended.

As a result, Google said Vista violated Microsoft's 2002 antitrust settlement, which prohibits Microsoft from designing operating systems that limit the choices of consumers.

Google has asked the court overseeing the antitrust decree to order Microsoft to redesign Vista to enable users to turn off its built-in desktop-search program so competing programs could function better, officials said.

State officials said Barnett's memo rejected the Google complaint.

Before he joined the Justice Department in 2004, Barnett had been vice chairman of the antitrust department at Covington & Burling. It represented Microsoft in the antitrust case and continues to represent the company.

In a recent interview, Barnett declined to discuss the Google complaint, noting the decree requires complaints by companies to be kept confidential. He defended the federal government's overall handling of the Microsoft case.

"The purpose of the consent decree was to prevent and prohibit Microsoft from certain exclusionary behavior that was anti-competitive in nature," Barnett said.

"It was not designed to pick who would win or determine who would have what market share."

Prosecutors from several states said they believed Google's complaint about anti-competitive conduct resembled the complaint raised by Netscape, a company that popularized the Web browser, that was the basis of the 1998 lawsuit that led to the decree.

Connecticut Attorney General Richard Blumenthal declined to talk about the substance of the complaint, or which company made it. But he said the memo from Barnett surprised him. "Eyebrows were raised by this letter in our group, as much by the substance and tone as by the past relationship the author had had with Microsoft," said Blumenthal, one of the few state prosecutors who has been involved in the case since its outset.

"In concept, if not directly word for word, it is the Microsoft-Netscape situation," Blumenthal said. "The question is whether we're seeing déjà vu all over again."

The Bush administration has supported Microsoft in other antitrust skirmishes. Last year, the U.S. delegation to the European Union complained to European regulators that Microsoft had been denied access to evidence it needed to defend itself in an investigation there into possible anti-competitive conduct.

In December 2005, the Justice Department sharply criticized the Korean Fair Trade Commission after that agency ordered major changes in Microsoft's marketing practices in South Korea.

In 2004, the Justice Department criticized the European Commission for punishing Microsoft for including its video and audio player with its operating system.

Antitrust experts attribute the Bush administration's different approach to Microsoft to a confluence of political forces and significant changes in the marketplace.

A big factor has been the Bush administration's hands-off approach to business regulation. For its part, Microsoft, which spent more than $55 million on lobbying in Washington from 2000 to 2006 and substantially more on lawyers, has become a more effective lobbying organization.

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