States Have Issues With Microsoft Settlement

A number of the 18 states which pursued the antitrust suit against Microsoft Corp. hand-in-hand with the U.S.
Department of Justice (DOJ), are balking at the settlement the DOJ brokered with the company Friday.

According to published reports, some of the states say there are a dozen specific points that need to be changed in the agreement
before they will sign on. State officials reviewed the 22-page settlement agreement over the weekend, and reportedly found
exceptions that pulled the teeth of many of the provisions.

For instance, the settlement gives Microsoft wide latitude in determining what software is a part of the Windows operating system.
Also, while certain provisions are intended to give vendors of competing middleware products more even footing with Microsoft, one
aspect of the document’s definition of “non-Microsoft middleware product” is that at least one million copies of the product must
have been distributed in the U.S. in the previous year. Presumably, by that definition, Microsoft would not be required to give
makers of newer technologies the APIs they would require to make their products run on Windows.

The states have until Tuesday to negotiate any changes and sign on to the agreement.

Microsoft competitors, watchdog groups and some analysts have been vocal in their disapproval of the settlement agreement reached
between the DOJ and Microsoft. Some competitors have called the agreement a reward, not a remedy, giving the company the go-ahead to
use the strength of its monopoly to continue its dominance of the software sector. That sentiment has been echoed by watchdog groups

“The reported settlement, stunningly, will not change either Microsoft’s business practices nor its software implementations one
iota,” said Ken Wasch, president of the Software & Information Industry Association (SIIA), when details of the agreement were first
made public Thursday. “Instead, the settlement relies entirely on innocent third parties — the OEMs — to carry out any changes in
what consumers are offered in the marketplace.”

Wasch said the agreement appears to have less heft than the interim remedies ordered by U.S. District Judge Thomas Penfield Jackson
after he found that the company had in fact acted as an illegal monopoly.

“We strongly urge the Justice Department and the state attorneys general, even at this late stage, to reject this latest proposal.”

U.S. District Judge Colleen Kollar-Kotelly, who was assigned the case after the U.S. Court of Appeals for the District of Columbia
found Judge Jackson had acted improperly while hearing the case, must still review the settlement agreement under the Tunney Act of
1974. The Act governs antitrust settlements involving the government, and requires that Judge Kollar-Kotelly find the settlement in
the public interest before approving it. The states have the option of challenging the settlement during the Tunney Act review. And
even a few states may choose to continue pursuing the case separately, returning to court for a final round of remedy proceedings.

Microsoft could not be reached for comment.

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