(2 of 3)
Microsoft, which has been quick in the past to hail even mixed court decisions as victories, was uncharacteristically tight-lipped last week. "We remain committed to resolving the remaining issues in the case as quickly as possible," says Varma. Several state A.G.s, including Eliot Spitzer of New York and Tom Miller of Iowa, made it clear late last week that they would pursue the case separately from Justice if they believe the feds are going too easy on Microsoft in the settlement phase.
Justice, the state A.G.s and Microsoft will meet in the coming weeks and months for settlement talks. This week the parties plan to submit a joint game plan to Judge Colleen Kollar-Kotelly, who takes over from Thomas Penfield Jackson, the judge who ordered Microsoft to be broken up and was then removed from the case for improperly talking to reporters. Kollar-Kotelly, who has a reputation for brisk efficiency, will probably encourage the parties to hammer out an agreement.
With "structural" remedies like breakup off the table, the focus will shift to "conduct" remedies--agreed-upon rules designed to prevent Microsoft from using its monopoly over the desktop operating system in an anticompetitive manner. Justice said last week its starting point in developing these rules will be the interim conduct provisions handed down previously by Judge Jackson.
If those interim rules are a guide, any consent decree Justice works out with Microsoft will seek to change how the company leverages its Windows monopoly when it deals with other companies. Microsoft will probably be prevented from bullying other companies, as it was found to have done at trial, into using its products or not manufacturing competing products. And it could prevent Microsoft from forcing computer manufacturers to include Microsoft applications like instant messaging and media players as a condition for loading Windows on their machines.
Those applications--so-called middleware--will probably be the crux of any settlement. Microsoft is planning to use its new Windows XP software to promote its Windows Media Player, Windows Messenger and MSN Internet Service. The company's critics fear that Microsoft will use its Windows monopoly to create new middleware monopolies, much as Microsoft's Internet Explorer--which was bundled in the last version of Windows--took the browser market away from onetime leader Netscape.
In July Microsoft said it would allow computer makers leeway in deciding which icons to put on the Windows desktops of PCs they sold. But when Compaq announced that it would put AOL on its PC desktops, Microsoft decided that manufacturers that added any outside icons also had to add MSN, Internet Explorer and Microsoft Media Player icons. (AOL, Netscape and TIME are all part of AOL Time Warner.)
One critical unanswered question is what last week's decision means for the launch of XP, scheduled for Oct. 25. The government, or even private competitors, could seek an injunction preventing XP from being shipped in its current form, on the grounds that it is illegally anticompetitive. Although Justice could still try to do that, the emphasis on negotiations in its statement makes such action appear unlikely. If settlement talks break down, seeking a court order halting XP--or altering it after it shipped--would remain an option.