More Time Needed to Curtail Microsoft’s Bullying, States Say

A group of states is asking the judge overseeing the 2002 antitrust judgment against Microsoft to extend portions of the sanctions and monitoring provisions for another five years.

The six states — California, Connecticut, Iowa, Kansas, Minnesota and Massachusetts — as well as the District of Columbia, are especially concerned about the part of the judgment impacting middleware products, where the group argues Microsoft remains a massive market share leader. A large portion of the judgment’s enforcement actions runs out in November.

Dubbed the “California group” by the court, the states argued for the extension before Judge Colleen Kollar-Kotelly on Tuesday as part of a regular hearing on the software giant’s compliance with the antitrust judgment.

Maintaining a ‘Stranglehold’

The group’s main attorney, Stephen Houck, told the judge that Microsoft maintains a “stranglehold” over the consumer Web browser and operating system markets. “Very little has happened in five years in those markets,” he said.

The California group said it will formally file a request for the extension next month; an attorney for Microsoft said it would need time to prepare a response as well.

Specifically, the group is expected to ask the judge to keep in place provisions that prohibit Microsoft from using its market power to punish PC makers and Internet service companies that offer products that compete with Microsoft tools. It is not seeking to extend a requirement that Microsoft charge the top 20 PC makers the same prices for its products.

Five to 10?

Parts of the original order, crafted after Microsoft was found to have behaved in a way that violated antitrust laws, have already been extended, such as the requirement that Microsoft share communications protocols for its server products. The California group may seek to extend that requirement further, from 2009 to 2012, their attorney told the judge.

Other parties in the original action, including the Department of Justice and the state of New York, have said the rest of the decree should expire on schedule.

Though Microsoft said it would respond in time to the request to extend, it is not likely to b welcome the proposal, especially since the company fought hard to keep the original enforcement order confined to a five-year period.

In fact, Houck noted in the hearing that most antitrust consent decrees have a 10-year effective period because it often takes that long for market changes to take effect.

The judge said the request for extension would have to be for a specific “identifiable purpose,” suggesting she would look for a detailed explanation of how an extension would be effective. She also said it may take more time before the impact of the five-year of limitations on Microsoft and the software marketplace is felt. “The final chapter of the final judgment has not been written,” she said.

IE Dominance

Microsoft will likely fight hard against the extension because it has been eager to put the matter behind it and will be able to point to gains made by rival products in key markets, including the Web browser market.

The dominance of the Internet Explorer browser was a major driver in the antitrust action, with the states arguing that Microsoft used its dominance in the operating system market to force PC makers and others to use IE over the onetime market leader Netscape.

Since 2002, both the Mozilla Firefox browser and Apple’s Safari have made market share inroads — though the IE browser still dominates the market, with Net Applications saying it held 78 percent of the market in the second quarter compared to 15 percent for Firefox and less than 5 percent for Safari. Netscape’s browser had less than 1 percent market share, the firm said.

Other competitive products have appeared as well, with Google launching its Google Docs service and Sun Microsystems launching StarOffice. Apple has seen its share of the PC market grow as well, but only recently broke above the 5 percent level in the U.S.

Microsoft is likely to fight hard because “past several years have been all about putting these matters in the past,” Enderle Group Principal Analyst Rob Enderle told the E-Commerce Times. “They’ve spent billions on settlements and tried to behave in a way that would not ruffle any regulatory feathers.”

Everyone’s Watching

If the past is any indication, the judge is likely to be skeptical of the requests to expand or extend the decree.

The judge was reluctant to offer Google a forum for raising its complaints about the new Windows Vista, for instance, when the search company argued that Vista would exclude rival desktop search products. Microsoft headed that controversy off by reconfiguring Vista to allow users to choose other search tools.

Microsoft will be able to argue that the computer and Internet landscapes are vastly different today than when the original order was handed down, said Yankee Group analyst Laura DiDio — from the rise of Google to the continued emergence of open source as an alternative for business users.

With European regulators still battling with Microsoft as well and with so much riding on the success of Vista, Microsoft will work to avoid being bogged down by more antitrust disputes. “They’ve got to keep walking a fine line to try and keep everyone happy,” she added.