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Originally published August 31, 2007 at 12:00 AM | Page modified August 31, 2007 at 2:05 AM

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Reports clash on Microsoft's antitrust settlement

Dueling reports from the government lawyers overseeing Microsoft's aging antitrust settlement paint very different pictures of the current...

Seattle Times technology reporter

Microsoft and antitrust

Clock ticking on landmark settlement

New reports from government lawyers overseeing the 2001 settlement are the first in what will likely be a steady flow of opinions on the effectiveness of the sanctions against the company, most of which expire in November. That's one of several major antitrust milestones coming up in the fall. Here's a look at Microsoft's calendar:

Thursday: The Department of Justice, writing on behalf of one group of states, led by New York; and a second group of states lead by California, filed their respective reports with the judge overseeing the settlement to assess the effectiveness of the final judgments in the case. The two groups had dramatically different views. Microsoft also filed its own report.

Today: A regular quarterly joint status report is due from the parties to the case.

Sept. 11: A regular quarterly status conference before U.S. District Judge Colleen Kollar-Kotelly is scheduled.

Sept. 17: The European Union Court of First Instance is to rule on a 2004 antitrust decision, requiring Microsoft to unbundle its media player from the Windows operating system and license technology that allows servers to communicate with each other. The EU also imposed a $613 million fine in 2004 that may be reversed.

Oct. 30: Another joint status report in the U.S. antitrust case.

Nov. 6: Another quarterly status conference before Kollar-Kotelly.

Nov. 12: Major portions of the U.S. antitrust settlement expire. Microsoft has pledged to continue abiding by them — codifying its intentions with a set of Windows Principles issued last summer — but judicial oversight will end.

November 2009: The remaining portions of the antitrust settlement are to expire.

Source: Court records, Microsoft

Dueling reports from the government lawyers overseeing Microsoft's aging antitrust settlement paint very different pictures of the current status of the marketplace that the company dominated when it was hauled into court as a monopolist almost a decade ago.

A contingent of states, lead by California, said the final judgment in the case has not loosened Microsoft's control. But federal lawyers said the sanctions have fostered more competition.

The 2001 antitrust settlement imposed requirements on how Microsoft runs its Windows operating-system business.

But the California group's report to U.S. District Judge Colleen Kollar-Kotelly said the judgment "clearly has had little or no discernible impact in the marketplace as measured by the most commonly used metric — market shares."

"In the market at the heart of the case — Intel-compatible PC operating systems — Microsoft's share has remained persistently high at supra-monopoly levels," said the report, filed Thursday.

Windows ran 93 percent of PCs in 1991 and 92 percent in 2006 (after declining from 96 percent in 2005), according to IDC figures cited by the California group.

The Department of Justice has a dramatically different view of the outcome of five years of judicial oversight.

"[C]ompetition and consumers have benefited from the final judgments entered because of the Department's antitrust enforcement efforts against Microsoft," the DOJ said in a news release issued Thursday in conjunction with a report it filed on behalf of itself and another group of states.

The DOJ emphasized the goal of the settlement was to ensure a competitive environment for so-called middleware applications, such as Web browsers and media players, that could help erode the Windows monopoly.

"The litigation, however, did not afford a basis for extinguishing Microsoft's Windows monopoly position or for reducing it by a particular amount," DOJ lawyers wrote. "... Microsoft was never found to have acquired or increased its monopoly market share unlawfully."

The reports, requested by Kollar-Kotelly this spring, come as the court's oversight of the landmark antitrust settlement wanes. Major portions of the settlement expire in November. Judicial oversight of another portion was extended until November 2009.

Microsoft has pledged to adhere indefinitely to all of the settlement terms — which govern how it deals with PC manufacturers and publicizes technical documentation about Windows, among other things — under a set of "Windows Principles" issued last summer.

To support its assertion that the settlement has benefited consumers and competitors, the Justice Department cited the rise of Web browsers such as Mozilla's Firefox, Opera, and Apple's Safari; and media players from Apple and Adobe.

A department spokeswoman could provide no market-share data for these middleware products.

As further evidence that the settlement has weakened the Windows monopoly, the government points to trends such as online services delivered by Google and Yahoo; Apple computers shifting to Intel chips in 2006; virtualization software that allows multiple operating systems to run on the same hardware; and manufacturers such as Dell selling PCs pre-loaded with the Linux operating system.

Observers, including Howard University law professor Andrew Gavil, were skeptical of whether these competitors really benefited from the sanctions imposed on Microsoft in the settlement, also referred to as the consent decree.

"Some [competitors] might have come about anyway," Gavil said in an e-mail. "[T]he real comparison should not be between the world with an unrestrained Microsoft and the world with Microsoft as modestly restrained under the decree."

Instead, "the question is how much and whether [consumers and competitors] could have benefited even more from a more aggressive remedy," Gavil said.

He suggested the Bush administration's Justice Department at the time of the settlement was unwilling to impose such a remedy — one that might have served to directly reduce Microsoft's operating system market share.

"They didn't want [the decree] to be invasive and they didn't want it to be too regulatory, in terms of Microsoft's ability to function as a business," said Gavil, who was critical of the settlement when first announced and was quoted in the California group's report. "They had very modest expectations."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

Copyright © 2007 The Seattle Times Company

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