WASHINGTON (Reuters) -- The failure of settlement talks in the Microsoft case means a federal judge in Washington will have to choose whether to rein in the company's conduct or break it up if, as expected, he decides this week that the company broke the nation's antitrust laws.
U.S. Court of Appeals Chief Judge Richard Posner of Chicago announced Saturday that four months of mediation efforts had proved fruitless, saying in a one-page explanatory statement that differences between the two sides were "were too deep-seated to be bridged."So the case returns to the Washington, D.C., court of District Judge Thomas Penfield Jackson, who had delayed issuing a legal ruling on the case in hopes that Posner -- acting as a private mediator -- would find a solution.
Now there is no more reason for delay. Jackson will likely issue his "conclusions of law" soon, and those on both sides expect he will find Microsoft violated antitrust laws. That decision will build on Jackson's findings of fact last year that Microsoft abused monopoly power over its Windows operating system, damaging consumers, competitors and other firms.
Jackson's next task, if he rules against Microsoft, will be to impose a remedy that will halt Microsoft's abuse of monopoly power. He may conduct hearings to help him weigh the best remedies and listen to the arguments of both sides, but he will also have before him the unsuccessful proposal by government lawyers in the mediation.
One question is whether the government's last position in the settlement talks might limit the proposals it will make to Jackson.
"I don't think that will weigh into it," said Kevin Arquit, an antitrust lawyer for Clifford Chance in New York. "This judge has been through a lot of trials, and he knows that a good settlement is less than what either party truly thinks is sufficient."
Arquit said the Justice Department offer came at the end of four months of hard bargaining. By Posner's count, there had been almost 20 successive drafts of a possible consent decree, so it must have been a far cry from the government's original position. So the question remains whether the government might look not merely at conduct remedies but also at structural remedies that would break up the firm.
A source close to the government took the same view: "No decision has been made on remedies. All options remain open, nothing has been ruled in or out."
Inevitably, there was finger-pointing about who was at fault for the failure of the talks. Posner praised the professionalism of the Justice Department and Microsoft, but made no mention of the 19 states that were also a party to the case against the firm. Microsoft Chairman Bill Gates said during a conference call with reporters and analysts on Saturday the talks ultimately broke down because "the Department of Justice and the states were not working together." A lawyer close to the talks said on Saturday that was untrue and the real problem was that Microsoft had rejected the final Justice Department offer. A Microsoft spokesman disagreed. "It is inaccurate for anyone to say that Microsoft rejected a government proposal," Microsoft spokesman Mark Murray said. A source close to the government's case said it was Murray who was wrong. The source said Microsoft had refused to give other software developers access to the kinds of technical information that Microsoft itself used to develop applications.
That would put potential competitors to Microsoft products, such as its Word program, at a disadvantage. The source also said that although Microsoft's offer to give computer makers an opportunity to remove parts of the Windows operating system was a Trojan horse, loaded up with restrictions that would be unacceptable. And the source said Microsoft refused to allow computer makers to redesign Windows so that some other company could be featured instead of Microsoft. The source said computer makers should have control over their own products instead of ceding it to Windows. REUTERS t-->