Microsoft finds ally in Bush administration
Microsoft finds ally in Bush administration
By Stephen Labaton
Copyright by The International Herald Tribune
Published: June 10, 2007
WASHINGTON: Nearly a decade after the administration of President Bill Clinton began a landmark effort to break up Microsoft, President George W. Bush's administration has adopted a different course by defending the company both in the United States and abroad against accusations of anticompetitive conduct, including in a recent complaint by Google.
The policy shift reflects a substantially different view of antitrust policy, as well as a recognition of major changes in the marketplace. The battlefront among technology companies has shifted from computer desktop software, a category that Microsoft dominates, to Internet search and Web-based software programs that allow users to bypass products made by Microsoft, the largest software maker in the world.
In the most striking recent example of the policy shift, the top antitrust official at the U.S. Justice Department urged state prosecutors last month to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft's behavior. Google has accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google's desktop search program, lawyers involved in the case said.
The official, Assistant Attorney General Thomas Barnett, had until 2004 been a top antitrust partner at Covington & Burlington, the law firm that has represented Microsoft in several antitrust disputes.
At the firm, Justice Department officials said, he never worked on Microsoft matters. Still, for more than a year after arriving at the department, he removed himself from the case because of conflict-of-interest issues. Ethics lawyers ultimately cleared his involvement.
Barnett's memo dismissing Google's claims, sent to state attorneys general around the nation, alarmed many of them, they and other lawyers from five states said. Some state officials said they believed that Google's complaint had merit. They also said that they could not recall receiving a request by any head of the Justice Department's antitrust division to drop any inquiry.
Barnett's memo appears to have backfired, state officials said.
Prosecutors from several states said they intended to pursue the Google accusations with or without the federal government. In response, U.S. prosecutors are now discussing with the states whether the Justice Department will join them in pursuing the Google complaint.
The complaint has not been made public by Google or the judge overseeing the Microsoft consent decree, Colleen Kollar-Kotelly of the U.S. District Court in Washington, who has scheduled a hearing on the decree for this month.
"With the change in administrations there has been a sharp falling away from the concerns about how Microsoft and other large companies use their market power," said Harry First, a professor at the New York University School of Law and the former top antitrust lawyer for New York State.
"The administration has been very conservative and far less concerned about single-firm dominant behavior than previous administrations."
Ricardo Reyes, a spokesman for Google, declined comment on the case.
Bradford Smith, the general counsel at Microsoft, said that the company was unaware of Barnett's memo. He said that Microsoft had not violated the consent decree and that it had already made modifications to Vista in response to concerns raised by Google and other companies.
He said that the new operating system had been carefully designed to work well with rival software products and that an independent technical committee that works for the Justice Department and the states had spent years examining Vista for possible anticompetitive problems before it went on sale.
He said that even though the consent decree did not oblige Microsoft to make changes to Vista in response to Google's complaint, Microsoft lawyers and engineers had been working closely with both state and U.S. officials in recent days in search of an accommodation.
"We've made a decision to go the extra mile to be reasonable," Smith said. "The discussions between the company and the various government agencies have been quite fruitful."
Microsoft was saved from being split in half by a U.S. appeals court decision issued in 2001. The ruling found that the company had repeatedly abused its monopoly power in the software business, but it reversed a lower court order sought by the Clinton administration to split up the company.
Bush administration officials who felt that the Clinton administration had overreached in the case promptly settled it.
Google complained to U.S. and state prosecutors that consumers who try to use its search tool on Microsoft Vista were frustrated because Vista has a competing desktop search program that cannot be turned off. When the Google and Vista search programs are run simultaneously on a computer, their indexing programs slow the operating system considerably, Google contends. As a result, Google said that Vista violated Microsoft's 2002 antitrust settlement, which prohibits Microsoft from designing operating systems that limit the choices of consumers.
Google has asked the court overseeing the antitrust decree to order Microsoft to redesign Vista to enable users to turn off its built-in desktop search program so that competing programs could function better, officials said.
State officials said that Barnett's memo rejected the Google complaint, repeating Microsoft's legal arguments.
In a recent interview, Barnett declined to discuss the Google complaint, noting that the decree requires complaints by companies to be kept confidential. He defended the U.S. government's overall handling of the Microsoft case.
"The purpose of the consent decree was to prevent and prohibit Microsoft from certain exclusionary behavior that was anticompetitive in nature," Barnett said. "It was not designed to pick who would win or determine who would have what market share."
"We want to prevent Microsoft from doing those things that exclude competitors," he added. "We also don't want to disrupt the market in a way that will be harmful to consumers."
Prosecutors from several states said that they believed that Google's complaint about anticompetitive conduct resembled the complaint raised by Netscape, a company that popularized the Web browser, in a 1998 lawsuit.
Attorney General Richard Blumenthal of Connecticut declined to talk about the substance of the complaint, or which company made it. But he said the memo from Barnett had surprised him.
"Eyebrows were raised by this letter in our group, as much by the substance and tone as by the past relationship the author had had with Microsoft," he said.
"In concept, if not directly word for word, it is the Microsoft-Netscape situation," Blumenthal said. "The question is whether we're seeing déjà vu all over again. We've been through this long grueling arduous lawsuit and then enforcement of a consent decree, and here we are maybe back to Square 1."
The Bush administration has supported Microsoft in other antitrust skirmishes as well. Last year, the U.S. delegation to the European Union complained to European regulators that Microsoft had been denied access to evidence it needed to defend itself in an investigation there into possible anticompetitive conduct. The U.S. delegation is led by Ambassador Boyden Gray, who had worked for Microsoft as a lawyer and lobbyist.
Robert Gianfrancesco, a spokesman for the delegation, said that Gray had not formally removed himself from involvement in Microsoft issues but was not involved in the complaint to European regulators, which was handled by other U.S. diplomats in the delegation.
The administration also intervened on behalf of Microsoft in December 2005, when the Justice Department sharply criticized the Korean Fair Trade Commission after that agency ordered major changes in Microsoft's marketing practices in South Korea.
And in 2004, the Justice Department criticized the European Commission for punishing Microsoft for including its video and audio player with its operating system.
Antitrust experts attribute the Bush administration's approach to Microsoft to a confluence of political forces as well as changes in the marketplace.A big factor has been the Bush administration's hands-off approach to business regulation. For its part, Microsoft, which spent more than $55 million on lobbying activities in Washington from 2000 to 2006 and substantially more on lawyers, has become a more effective lobbying organization."The generous and noncynical view is that there has been a fundamental change in philosophy about the degree to which antitrust should be used to regulate business activity," said Andrew Gavil, an antitrust law professor at Howard University."In the Microsoft case, you can see how that change has manifested itself."
By Stephen Labaton
Copyright by The International Herald Tribune
Published: June 10, 2007
WASHINGTON: Nearly a decade after the administration of President Bill Clinton began a landmark effort to break up Microsoft, President George W. Bush's administration has adopted a different course by defending the company both in the United States and abroad against accusations of anticompetitive conduct, including in a recent complaint by Google.
The policy shift reflects a substantially different view of antitrust policy, as well as a recognition of major changes in the marketplace. The battlefront among technology companies has shifted from computer desktop software, a category that Microsoft dominates, to Internet search and Web-based software programs that allow users to bypass products made by Microsoft, the largest software maker in the world.
In the most striking recent example of the policy shift, the top antitrust official at the U.S. Justice Department urged state prosecutors last month to reject a confidential antitrust complaint filed by Google that is tied to a consent decree that monitors Microsoft's behavior. Google has accused Microsoft of designing its latest operating system, Vista, to discourage the use of Google's desktop search program, lawyers involved in the case said.
The official, Assistant Attorney General Thomas Barnett, had until 2004 been a top antitrust partner at Covington & Burlington, the law firm that has represented Microsoft in several antitrust disputes.
At the firm, Justice Department officials said, he never worked on Microsoft matters. Still, for more than a year after arriving at the department, he removed himself from the case because of conflict-of-interest issues. Ethics lawyers ultimately cleared his involvement.
Barnett's memo dismissing Google's claims, sent to state attorneys general around the nation, alarmed many of them, they and other lawyers from five states said. Some state officials said they believed that Google's complaint had merit. They also said that they could not recall receiving a request by any head of the Justice Department's antitrust division to drop any inquiry.
Barnett's memo appears to have backfired, state officials said.
Prosecutors from several states said they intended to pursue the Google accusations with or without the federal government. In response, U.S. prosecutors are now discussing with the states whether the Justice Department will join them in pursuing the Google complaint.
The complaint has not been made public by Google or the judge overseeing the Microsoft consent decree, Colleen Kollar-Kotelly of the U.S. District Court in Washington, who has scheduled a hearing on the decree for this month.
"With the change in administrations there has been a sharp falling away from the concerns about how Microsoft and other large companies use their market power," said Harry First, a professor at the New York University School of Law and the former top antitrust lawyer for New York State.
"The administration has been very conservative and far less concerned about single-firm dominant behavior than previous administrations."
Ricardo Reyes, a spokesman for Google, declined comment on the case.
Bradford Smith, the general counsel at Microsoft, said that the company was unaware of Barnett's memo. He said that Microsoft had not violated the consent decree and that it had already made modifications to Vista in response to concerns raised by Google and other companies.
He said that the new operating system had been carefully designed to work well with rival software products and that an independent technical committee that works for the Justice Department and the states had spent years examining Vista for possible anticompetitive problems before it went on sale.
He said that even though the consent decree did not oblige Microsoft to make changes to Vista in response to Google's complaint, Microsoft lawyers and engineers had been working closely with both state and U.S. officials in recent days in search of an accommodation.
"We've made a decision to go the extra mile to be reasonable," Smith said. "The discussions between the company and the various government agencies have been quite fruitful."
Microsoft was saved from being split in half by a U.S. appeals court decision issued in 2001. The ruling found that the company had repeatedly abused its monopoly power in the software business, but it reversed a lower court order sought by the Clinton administration to split up the company.
Bush administration officials who felt that the Clinton administration had overreached in the case promptly settled it.
Google complained to U.S. and state prosecutors that consumers who try to use its search tool on Microsoft Vista were frustrated because Vista has a competing desktop search program that cannot be turned off. When the Google and Vista search programs are run simultaneously on a computer, their indexing programs slow the operating system considerably, Google contends. As a result, Google said that Vista violated Microsoft's 2002 antitrust settlement, which prohibits Microsoft from designing operating systems that limit the choices of consumers.
Google has asked the court overseeing the antitrust decree to order Microsoft to redesign Vista to enable users to turn off its built-in desktop search program so that competing programs could function better, officials said.
State officials said that Barnett's memo rejected the Google complaint, repeating Microsoft's legal arguments.
In a recent interview, Barnett declined to discuss the Google complaint, noting that the decree requires complaints by companies to be kept confidential. He defended the U.S. government's overall handling of the Microsoft case.
"The purpose of the consent decree was to prevent and prohibit Microsoft from certain exclusionary behavior that was anticompetitive in nature," Barnett said. "It was not designed to pick who would win or determine who would have what market share."
"We want to prevent Microsoft from doing those things that exclude competitors," he added. "We also don't want to disrupt the market in a way that will be harmful to consumers."
Prosecutors from several states said that they believed that Google's complaint about anticompetitive conduct resembled the complaint raised by Netscape, a company that popularized the Web browser, in a 1998 lawsuit.
Attorney General Richard Blumenthal of Connecticut declined to talk about the substance of the complaint, or which company made it. But he said the memo from Barnett had surprised him.
"Eyebrows were raised by this letter in our group, as much by the substance and tone as by the past relationship the author had had with Microsoft," he said.
"In concept, if not directly word for word, it is the Microsoft-Netscape situation," Blumenthal said. "The question is whether we're seeing déjà vu all over again. We've been through this long grueling arduous lawsuit and then enforcement of a consent decree, and here we are maybe back to Square 1."
The Bush administration has supported Microsoft in other antitrust skirmishes as well. Last year, the U.S. delegation to the European Union complained to European regulators that Microsoft had been denied access to evidence it needed to defend itself in an investigation there into possible anticompetitive conduct. The U.S. delegation is led by Ambassador Boyden Gray, who had worked for Microsoft as a lawyer and lobbyist.
Robert Gianfrancesco, a spokesman for the delegation, said that Gray had not formally removed himself from involvement in Microsoft issues but was not involved in the complaint to European regulators, which was handled by other U.S. diplomats in the delegation.
The administration also intervened on behalf of Microsoft in December 2005, when the Justice Department sharply criticized the Korean Fair Trade Commission after that agency ordered major changes in Microsoft's marketing practices in South Korea.
And in 2004, the Justice Department criticized the European Commission for punishing Microsoft for including its video and audio player with its operating system.
Antitrust experts attribute the Bush administration's approach to Microsoft to a confluence of political forces as well as changes in the marketplace.A big factor has been the Bush administration's hands-off approach to business regulation. For its part, Microsoft, which spent more than $55 million on lobbying activities in Washington from 2000 to 2006 and substantially more on lawyers, has become a more effective lobbying organization."The generous and noncynical view is that there has been a fundamental change in philosophy about the degree to which antitrust should be used to regulate business activity," said Andrew Gavil, an antitrust law professor at Howard University."In the Microsoft case, you can see how that change has manifested itself."
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