News > Technology
Microsoft talks fail
April 1, 2000: 10:51 p.m. ET

Mediation effort "fruitless"; judge's final ruling expected soon
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WASHINGTON (CNNfn) - Settlement talks between Microsoft Corp. and government officials ended without a deal Saturday, setting the stage for a final ruling soon in one of the biggest antitrust cases in the history of the United States.
    The failure to settle means federal judge Thomas Penfield Jackson, hearing the case in Washington, D.C., will issue his final ruling soon -- and could lead to harsh penalties against the giant software company, including a possible breakup. The judge Tuesday put off a final ruling in the case as both sides made a last-ditch effort to settle.
    graphicIn a preliminary ruling in November, Judge Jackson found Microsoft had abused its monopoly in personal computer software, harming consumers and competitors. The judge is widely expected to come down heavily on Microsoft in his final ruling.
    The mediator in the settlement talks, federal appeals judge Richard Posner, issued a statement and sent an e-mail to all the parties in the case late Saturday announcing the end of the talks.
    "I regret to announce the end of my efforts to mediate the Microsoft antitrust case," Posner said in the statement, carried by news agencies Saturday. He said that "the quest has proved fruitless," adding that the differences between the two sides were "too deep-seated to be bridged."
    Microsoft  (MSFT: Research, Estimates) Chairman Bill Gates expressed disappointment at the development. Justice Department antitrust chief Joel Klein thanked Posner for his efforts and said any remedy must address "competitive problems presented by Microsoft's abuse of its monopoly position." Microsoft has maintained it did not break antitrust laws and vowed to fight the case on appeal if, as expected, Judge Jackson rules against it.
Four months of talks but no deal

    Posner, a chief judge for the U.S. Court of Appeals in Chicago, had held talks for nearly four months to try to settle the case, in which the Justice Department and 19 states sued Microsoft, alleging it abused its dominance in personal computer software and tried to extend that power to the Internet.
    A lawyer close to the government's case told CNNfn Saturday "it became clear this morning that Microsoft wouldn't move off its last position" and that the government had "raised concerns about loopholes they created" in their latest settlement offer, made late last month.
VideoExcerpts from CNN's interview with FTC former Deputy Director George Cary, who says a Microsoft appeal is likely. (April 2)
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    Jackson, in a preliminary ruling in November, said that Redmond, Washington-based Microsoft abused its monopoly power derived from its Windows software - used in more than 80 percent of all personal computers - and tried to extend that dominance to the Internet browser market, hurting consumers, competitors such as Netscape Communications, and other companies.
    One of the key points in the government's case was that Microsoft competed unfairly against Netscape, whose Navigator Internet browser suffered versus Microsoft's browser, known as Explorer. Ultimately, Netscape sold out to America Online (AOL: Research, Estimates), which later, in a separate deal, agreed to merger with Time Warner Inc. (TWX: Research, Estimates), the parent of CNN and CNNfn.
    In his final ruling - which could come this week -- Jackson is widely expected to find that Microsoft violated the nation's antitrust laws. He would then decide what remedies should be applied -- something that could take weeks or even months, according to antitrust experts who have followed the case.
    "We'll probably have more testimony ... with a result (on remedies) somewhere in mid-summer," William Kovacic, an antitrust expert at George Washington University who has closely followed the trial, told CNN.
    Judges finding that companies have abused their dominant position have done everything from impose fines to order changes in company practices, to the more extreme step of splitting up a monopoly, as happened to Standard Oil in 1911 and AT&T Corp. in the 1980s.
Microsoft went "the extra mile": Gates

    "It's unfortunate that a settlement wasn't possible," Gates said in a conference call, the Associated Press reported. "Microsoft certainly went the extra mile."
    Gates said the Microsoft mediation team had offered "significant concessions" and reiterated that he believes the company has a strong legal case. He dismissed suggestions that the breakdown of talks represented a "corporate death penalty" for Microsoft.
    For its part, Microsoft was getting ready to explain the breakdown in the talks to Wall Street analysts. Ahead of a conference call expected Sunday, Rick Sherlund of Goldman Sachs told CNNfn he expects Microsoft stock to be fall sharply Monday morning. 
    Sherlund said he does not expect Microsoft to resume settlement talks after Judge Jackson's ruling, expected this week, but rather to appeal all the way to the Supreme Court, if necessary.
    The government had made an earlier deal with Microsoft in 1995 and, in its view, Microsoft used a loophole in that agreement to meld its Windows operating system with its Internet Web browser.
    Posner, in his statement, mentioned nothing about the 19 states also suing Microsoft, according to news agency reports.
    Connecticut Attorney General Richard Blumenthal said that the two sides had sought common ground "in good faith," Reuters reported. But he said they are "now ready to return to the court with the same determination as ever."
    Shares in Microsoft rose 2-7/8 to 106-1/4 Friday as tech stocks rallied after recent weakness. Since Jackson's Nov. 5 preliminary ruling, the stock has fluctuated between about 90 and 115, partly because of uncertainty over the final outcome of the trial. Back to top
    -- with contributions from CNNfn's Steve Young and wire reports


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