Antitrust case could delay MS products, increase prices

Laura DiDio

Millions of dollars and four years of legal wrangling later, Microsoft is
still not out of the woods on the antitrust suit. And Microsoft’s detractors,
namely, the nine states still holding out on the settlement, are being dogged in
their determination to press for tougher sanctions than the Justice Department
has agreed to.

Recently, Federal Court Judge Colleen Kolar-Kotelly rejected Microsoft’s
request to delay hearings on sanctions. At the same time, Microsoft has
rightfully complained to the judge that it is having problems obtaining
pertinent documents from some of the companies named as witnesses by the nine
states. Last June, the Federal Appeals court upheld findings that Microsoft had
violated US antitrust laws by illegally maintaining a monopoly in desktop
operating systems. But the Department of Justice rejected the notion of breaking
Microsoft into two separate companies and had harsh words for Judge Thomas
Penfield-Jackson for ill-advised remarks against Microsoft. Last summer, many
industry watchers felt that Microsoft had secured a big victory.

But nine of the 18 states that originally joined the antitrust suit felt
otherwise. The nine holdout states and their respective Attorney Generals are
intent on getting broader, tougher remedies. At a Judiciary Committee meeting in
mid-December, several senators – in a bi-partisan effort – led by Republican
Senator Orrin Hatch of Utah (the ranking senator from Microsoft rival Novell’s
home state) and Senator Patrick Leahy, a Democrat from Vermont, called the
remedies being discussed so far as being "inadequate." The harsh
remedies called for by the nine states include the following:

• Forcing Microsoft to sell a stripped down version of Windows
• The inclusion of Java language embedded in Windows operating systems
• Forcing Microsoft to make the Office productivity suite run on rival
  operating systems

While the back-and-forth legal maneuverings and bickering may seem like the
latest installment in a daytime soap opera, in fact, the timing of these
hearings are a potential lynchpin on which the eventual outcome of the entire
settlement may turn. The nine dissenting states are reluctant to endorse a
settlement in advance of hearings on further remedies because they believe it
would weaken their case to get the strongest possible sanctions – up to and
including the aforementioned remedies.

A settlement may be months or even a year or more away, depending on how
adroit lawyers for each side are. So what do these continuing legal maneuvers
mean to Microsoft’s corporate customers? The longer and more protracted the
legal machinations (and they promise to be very long and protracted indeed) the
more likely Microsoft is to be distracted. This could result in delaying key
products. Already, Microsoft executives acknowledge that the next version of
Windows .NET Server – originally due out in the first quarter – will not
ship until the second half of 2002 now.

While no one, including Giga, attributes the Windows .NET Server delay to the
legal battles, it certainly can’t help matters. Another possible side effect
of the legal squabbles: as Microsoft’s legal bills mount, it could decide to
pass on the cost of fighting the battles to customers in the form of price
hikes. It would be the ultimate irony, if the antitrust suit settlement,
designed to provide relief to Microsoft customers ended up harming the very
parties it intended to help.