More Anti-Trust Headaches for Microsoft?

While a new lawsuit appears unlikely, two state attorneys general who have championed the government’s ongoing anti-trust case against Microsoft Corp. had some harsh words for the software behemoth Wednesday concerning its new crown jewel: the upcoming Windows XP operating system.

In a joint statement issued Wednesday, Connecticut Attorney General Richard Blumenthal and Iowa Attorney General Tom Miller said they had “serious concerns” about Microsoft’s “very troubling” strategy for the OS. But they also noted, “We have no current plans for a second lawsuit. We would never completely rule out a new suit, but our focus now is on the antitrust case that already is before the courts.”

Recent skirmishes between Microsoft and leading ISP AOL Time Warner appear to have raised the attorney generals’ ire, according to Goldman Sachs & Co. analyst Rick G. Sherlund. The two tech giants have been battling over whether America Online will be bundled with the new operating system. Also, AOL Time Warner has threatened to raise the anti-trust alarm over Microsoft’s plans to hard-wire its own Instant Messaging service in the OS.

“The concern about Windows XP appears to be centered around whether
Microsoft can leverage this monopoly to unfairly compete in the market
against AOL,” Sherlund, who characterized Connecticut and Iowa as “hard-line
states,” wrote in research issued Thursday. “This is a long standing issue
and may be intended to apply pressure to Microsoft to compromise in
negotiations with AOL and others.”

Sherlund said the tack the attorney generals take will likely depend on the
decision from the U.S. Appeals Court on the current anti-trust case. That
decision is expected in the near future.

“We expect the outcome of the current litigation to either encourage or
discourage these hard-line states from a further action,” Sherlund said. “We
would expect the Appeals Court to help resolve the central issue in dispute
between Microsoft and its opponents and provide the legal basis for
addressing issues these several hard-line states have repeatedly expressed
concern about.”

Sherlund added that further action will likely be dead in the water if the
Appeals Court rules in Microsoft’s favor.

“These several states might also have difficulty gaining support from other
States Attorney’s General if the current anti-trust action is undermined by
an Appeals Court ruling.”

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