ome of the leading state attorneys general in the Microsoft (news/quote) antitrust case said yesterday that they would press for tough sanctions against the software maker, including ones that apply to the company's new operating system, Windows XP.
The states also served notice that they were willing to break with the Bush administration and pursue Microsoft on their own if they think the steps the Justice Department is to suggest do not go far enough to foster competition in the software industry.
"We are there, and we have our own expertise," said Eliot Spitzer, the attorney general of New York.
Comments from Mr. Spitzer, Bill Lockyer of California, Richard Blumenthal of Connecticut and Tom Miller of Iowa came one day after the Justice Department announced that it would not seek a breakup of Microsoft and would not pursue another significant claim in the case — that the company had illegally bundled its Internet browser with its Windows systems.
The message from the states that they plan to take a harder line in the next phase of the Microsoft case promises to make reaching an out-of-court settlement more difficult. The states played a prominent role in prodding the Justice Department to walk away from a settlement with Microsoft in April 2000, when the two sides nearly reached an agreement.
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With their public comments, the states are also trying to encourage the Justice Department to create effective remedies against Microsoft, short of splitting the company in two. The Clinton administration advocated breaking up the company, and the judge who heard the case, Thomas Penfield Jackson of Federal District Court, approved a breakup plan after finding that Microsoft was a monopolist and had repeatedly violated the nation's antitrust laws.
Three months ago, a federal appeals court upheld much of the lower court's ruling, though not all of it. The appeals court removed Judge Jackson from the case for making pointed comments about Microsoft to reporters.
It also struck down his breakup order and cast doubts on whether a breakup was the appropriate remedy.
When the Justice Department announced on Thursday that it would not seek a breakup, it said that it would instead seek "conduct remedies", or court-ordered sanctions to change Microsoft's corporate behavior. And the Justice Department said it would "seek an order that is modeled after the interim conduct-related provisions" in Judge Jackson's final judgment.
But those steps were intended as temporary measures until the breakup, which was meant to restore competition. In addition, those conduct remedies — including the easing of contract restrictions on makers of personal computers and the forced disclosure of technical information — were largely the same as the list of proposed steps in the settlement negotiations that collapsed in April 2000. And that was before Microsoft had been found in court to be a monopolist that had repeatedly violated antitrust laws.
The state attorneys general are pushing to ensure that the sanctions on Microsoft's conduct are more stringent and enforceable, although they did not say yesterday precisely what further curbs they had in mind.
"The interim conduct provisions are very much a starting point and not an end-all solution, at least for the states," Mr. Blumenthal said.
Mr. Miller said, "Other steps can and should be considered."
In a joint statement, Mr. Spitzer and Mr. Lockyer said, "We look forward to continuing to work with the Department of Justice in the proceedings that are about to begin before the trial court, but will, if necessary to protect the public, press for remedies that go beyond those requested by the Department of Justice."
Hearings on remedies are scheduled to begin later this month before a new trial judge, Colleen Kollar- Kotelly of the Federal District Court for the District of Columbia. There have also been talks in recent weeks between the two sides to revisit the subject of settlement, but they have made no real progress, people close to those discussions said. With the government taking the breakup and bundling issues off the table, the prospects for a settlement are improved, but how much is not clear.
Justice Department officials said on Thursday that they would not try to stop Microsoft from marketing Windows XP, which manufacturers are beginning to install this month in PC's and which will be sold in retail stores in October. But the Justice Department officials said they would review what court-ordered sanctions should apply to the latest version of Windows, Microsoft's monopoly product.
In their statement, Mr. Spitzer and Mr. Lockyer said they would insist that Windows XP receives "close scrutiny in arriving at a judicially ordered remedy."
In Windows XP, Microsoft is tightly integrating not only its Web browser, but also software for online commerce, for playing music delivered over the Internet and for digital photography. Microsoft says that integrating such software into the operating system is a consumer benefit. But critics assert that the bundling practice gives Microsoft a huge advantage in new markets and stifles competition.
"We should not let the browser story be repeated again and again in new markets," Mr. Spitzer said.
Although the Justice Department has decided not to pursue the bundling charge, the district court's temporary conduct remedies provide a blueprint for trying to protect competition. One provision says Microsoft can add other software to Windows, including a browser, e-mail software and media playing programs, but that it must permit PC makers and consumers to remove the added software.
In addition, the provision requires Microsoft to give PC makers who remove Microsoft software a discount on the price of Windows, so that PC makers have an incentive to choose competing software if it is competitive.
Yet for this and other conduct remedies, like requiring Microsoft to share its technical information with rivals, the lingering question is whether they can be sidestepped too easily and thus cannot be enforced.
To tighten compliance, some antitrust experts suggest a "crown jewel" provision in any remedies order. Under such an arrangement, if Microsoft is found to violate a court- approved consent decree, it would have to pay large fines or perhaps even be broken up.