Originally created 01/26/00

Some states reluctant to endorse Microsoft breakup



WASHINGTON -- Signaling a potential division within ranks that could complicate settlement talks and the next important phase of the Microsoft trial, some states active in the case believe the Justice Department's plan to break up one of the world's most successful companies may not be the best solution.

Although debate continues in secret among the 19 state attorneys general deciding what to recommend about Microsoft Corp., there is a risk the government might fail to bring a unified proposal on sanctions to U.S. District Judge Thomas Penfield Jackson. He previously told government lawyers bluntly to agree among themselves before they present in court any plan for sanctions.

"I would not like to have to deal with divergent points of view," Jackson told them in a private meeting in November.

Illustrating the difficulties in achieving such consensus, Ohio's attorney general indicated she is leaning toward a ban on some of Microsoft's behavior toward others in the technology industry rather than a forced restructuring of the software giant.

Calling the dilemma "the most difficult professional decision I ever got involved with," Ohio Attorney General Betty Montgomery told The Associated Press that a breakup of Microsoft "has never been on my top list."

"I have to tell you that my bias is toward a conduct resolution, but again it's too early to be specific," said Montgomery. "Quite frankly, I indicated to my staff when we started this lawsuit that I was not looking out for a structural solution as much as a conduct solution."

An official in another of the 19 states, who spoke on condition of anonymity, also has hinted that a breakup -- considered the "death penalty" among possible remedies -- might be too disruptive for consumers.

Critics have suggested a court-ordered breakup could result in different -- even incompatible -- versions of Microsoft's dominant Windows software, which is entrenched as a de facto standard for running most of the world's personal computers.

Iowa Attorney General Tom Miller, who is coordinating the effort by the 19 states, acknowledged Tuesday there was "no lock step" among the states but said it was inaccurate to suggest the attorney general were at loggerheads over what sanctions to recommend.

"To imply there is a lot of division among the states is an enormous leap, an enormous stretch," Miller said. He declined to discuss internal talks about remedies, saying they were too closely linked to secret settlement negotiations.

In the government's final legal filing before the next round of courtroom arguments, it rebutted claims made by Microsoft in earlier filings. The government said the company misapplied existing law, "addresses straw men and seeks to apply to this case out-of-context passages from decisions involving patently different market circumstances."

Montgomery, a Republican now in her second and final term as attorney general, indicated the states may eventually endorse a breakup, such as Justice's idea of splitting Microsoft into three parts. But she also suggested not all the states may participate fully.

"I can't tell you at this point ... what the resolution will be, and ... what I will feel about it and whether Ohio will join in that solution," Montgomery said.

She also declined to discuss the ongoing settlement talks in Chicago with a federal mediator, U.S. Circuit Judge Richard Posner. Others close to the talks said Posner wrote a letter demanding renewed secrecy earlier this month after there were leaks about the Justice plan to dismantle Microsoft.

"It is a very hard negotiation, and it's very difficult to predict where it's going to end," Montgomery said.

One expert said arriving at a unified proposal without significant dissent will be difficult because attorneys general -- many of whom aspire to higher elected office -- are sensitive to polls showing strong opposition to government breakup plans.

"The states, because of this direct connection to the electorate, do pay more attention to the views of constituents," said antitrust expert William Kovacic of George Washington University. He also noted that the increasingly important role of the states "signifies the extent to which the power in this nationally important economic decision has seeped out of Washington."

Miller dismissed as "nonsense" any suggestions that public opinion would influence the decision by the attorneys general about Microsoft, saying, "We got in this to do what we thought was right."

Microsoft executives have dismissed discussion of sanctions as premature. However, the company's newly appointed chief executive officer, Steve Ballmer, wrote in a letter to the editor of The Washington Post this week that "breaking up Microsoft would be bad for the company, bad for the industry and, most important, bad for consumers."

"It's disheartening to see a handful of pundits and special interests campaigning for such extreme regulations against Microsoft," Ballmer wrote.

Montgomery said she was concerned that Microsoft could unfairly dominate Internet commerce, saying, "The reason I got into the litigation was because I did not want one tollgate at the e-commerce highway."

The next round of courtroom arguments will be Feb. 22. Unless the case is settled, which appears unlikely, the judge will probably rule by April on which antitrust laws Microsoft violated. A hearing to decide Microsoft's fate could come by spring or early summer.