Reports: Impasse Could Be Declared in Talks

BOSTON (03/26/2000) - Microsoft Corp.'s settlement proposal to end its federal antitrust case is insufficient, and U.S. government prosecutors might declare an impasse in negotiations as soon as tomorrow, the Los Angeles Times reported today.

In a departure from several days worth of published reports by major U.S. newspapers and wire services, the Times report said that its anonymous sources were "close" to the U.S. government. Reports elsewhere have not identified which side the anonymous sources were on.

The settlement proposal from Microsoft was termed "detailed" by the newspaper.

The proposal reportedly was sent to the U.S. Department of Justice (DOJ), 19 U.S. state attorneys general and the District of Columbia who have joined forces in the federal lawsuit alleging that the software maker has violated federal antitrust laws by engaging in anticompetitive business practices.

Central to the case is Microsoft's alleged "tying" of its Internet Explorer Web browser to its Windows operating system. Government prosecutors argue that Microsoft used its monopoly power in the operating systems market in an attempt to also control the Internet browser market. The settlement proposal reportedly does not acknowledge antitrust violations nor does it allow for restrictions in how Microsoft develops and markets Windows in future, the Times reported.

However, the proposal is said to include an offer by Microsoft to untie the browser from some versions of Windows, according to various published reports over the weekend. The company also said it will alter its software licensing agreements, share technical information and allow PC vendors to customize Windows, the Times reported. [See "Microsoft Makes Antitrust Settlement Offer," March 25.]District Court Judge Thomas Penfield Jackson reportedly told both sides last week that he will issue his conclusions of law Tuesday and so urged them to work toward a settlement before then. In November of last year, Jackson ruled in his findings of fact that Microsoft is a monopoly and has used its operating system dominance to squelch competition in the browser market. Jackson will rule in the conclusions of law whether or not he thinks Microsoft used its monopoly power to violate federal antitrust laws.

Jackson's findings of fact were so strongly supportive of government arguments in the case that many observers believe that his conclusions of law will find in favor of the government as well.

The flurry of published reports citing anonymous sources picked up late last week when U.S. government prosecutors were said to have backed off their position that Microsoft should be broken up into separate companies -- a move that got mediation discussions going again. Microsoft officials vehemently oppose breaking up the company.

Jackson has appointed Richard Posner, chief judge in the 7th Circuit Court of Appeals in Chicago, to serve as mediator in the case. The two sides reportedly have not met during the mediation process. Instead, Posner has handled conveying back and forth via e-mail and fax the latest proposals from each side.

Published reports over the weekend said that no new negotiation sessions had been set, though anonymous sources told the Associated Press that talks could resume.

Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or athttp://www.microsoft.com/.

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