20000403

Microsoft mediation talks fail, judge says

WASHINGTON: The judge mediating the Microsoft Corp. MSFT case announced on Saturday that his settlement efforts had ended in failure, setting the stage for a ruling next week on whether the firm broke the nation's antitrust laws.

"I regret to announce the end of my efforts to mediate the Microsoft antitrust case," U.S. Court of Appeals Chief Judge Richard Posner of Chicago said in a statement.

Microsoft Chairman Bill Gates praised Posner's professionalism and expressed disappointment at the collapse of the mediation, which he blamed squarely on the government, which "would not agree to a fair and reasonable settlement."

Justice Department antitrust chief Joel Klein also thanked Posner and said any remedy must address "competitive problems presented by Microsoft's abuse of its monopoly position."

But Posner, who has been acting in a private capacity at the request of the judge in Washington hearing the matter, left the door ajar for a future settlement, saying it became clear last night the case would not settle "at this stage."

Posner said his four months of efforts had "proved fruitless" because differences between the two sides "were too deep-seated to be bridged."

The failure means that District Judge Thomas Penfield Jackson, who is hearing the case in Washington, D.C., will now issue his conclusions of law in the case.

Jackson had delayed the release of his decision until Thursday at the request of Posner, in a last-ditch attempt to reach a settlement.

Jackson found last year that Microsoft abused monopoly power over its Windows operating system, damaging consumers, competitors and other firms.

He is widely expected to find that Microsoft violated the nation's antitrust laws. After that, he will decide what remedies should be applied in the case.

Justice's Klein said that if Jackson finds the company violated the law, "we will seek a remedy that prevents Microsoft from using its monopoly in the future to stifle competition, hamper innovation and limit consumer choice."

Gates said the talks ultimately broke down because "the Department of Justice and the states were not working together."

"Between them, they appeared to be demanding either a breakup of our company or other extreme concessions that go far beyond the issues raised in the lawsuit," he told reporters in a conference call."

But a lawyer close to the case described Gates' comments as "nonsense." The lawyer told Reuters that, "Microsoft flatly rejected the Justice Department's proposal and insisted on its own approach which was filled with loopholes and trapdoors."

Klein said that although the government preferred a settlement, a "settlement for settlement's sake would be pointless," and that the government "could only agree to a remedy that effectively solves the competitive problems detailed in the court's findings of fact."

Microsoft has said it respectfully disagrees with Jackson's findings of fact.

In his one-page statement, Posner took a shot at the leaks that plagued the talks recently.

"Despite my strenuous efforts to maintain the confidentiality of the mediation, there has been a good deal of leaking and spinning, and this leaking and spinning have given rise to news reports that have created a misleading impression," Judge Posner wrote.

He said that one of the impressions was that there had been no serious negotiations until the past two weeks. Posner said that was wrong.

"On the contrary, almost 20 successive drafts of a possible consent decree, evolved over the past months, had been considered by the parties before it became clear late last night that the case would not settle, at least not at this stage of the litigation," he said.

Cases can be settled at any time, even when they are before the Supreme Court.

Posner praised both sides in the case, saying that "the collapse of the mediation is not due to any lack of skill, flexibility, energy, determination or professionalism on the part of the Department of Justice and Microsoft Corporation."

Posner mentioned nothing about the 19 states which are also parties to the suit.

Connecticut Attorney General Richard Blumenthal said that the two sides had sought common ground "in good faith." But he said they are "now ready to return to the Court with the same determination as ever."

Microsoft Chief Executive Steve Balmer said he believes the software giant still has a strong case and remains confident it will prevail in court.

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.

Later, that bundling or integration became one of the key allegations in the antitrust suit against Microsoft. The government said that Microsoft competed unfairly against Netscape, which later lost market share to Microsoft.

Ultimately, the Netscape share price dropped and the company sold out to America Online.-Reuters