Despite on/off rumour, MS settlement remains unlikely

But it kept Wall Street busy for a bit...


MS on Trial A false settlement rumour sent Microsoft shares up yesterday to almost $101, but they closed at $98 11/16, having opened at just over $96. There appears to be no substance whatsoever to the rumour, with all the signs pointing to Wall Street enjoying a good lunch and thinking how a little rumour of settlement could act as a laxative for Microsoft shares, which have been stuck in a narrow range for months, while all the excitement is with Linux and the Internet. Sure enough, a few minutes after 1pm EST, the price broke the $97 barrier and whizzed up to nearly $101 before the DoJ decided around 3pm to say that "The rumour is unfounded", with a resultant $2 dive in the shares. Microsoft was playing it close to its chest, with Mark Murray saying that Microsoft did not comment on rumours or its stock price, and that "We are not going to comment on anything related to the ongoing mediation process. For mediation to be successful it has to proceed in a confidential manner." There have been three sessions of talks with Judge Posner in Chicago, with the sides now meeting him separately. From past form, a settlement is most unlikely, because to Gates this would be capitulation when it is not absolutely dictated by events. It is interesting to recall, in order to show the remoteness of a mediated outcome, just what happened in July 1994 when Microsoft signed the consent decree. Anne Bingaman, then the antitrust chief at the DoJ, gave up a planned holiday and went to Brussels with two other lawyers for secret trilateral negotiations between Microsoft, Europe's DGIV and the DoJ during the week commencing 4 July 1994. Meetings were held several times a day throughout the week to discuss the minutiae, but an impasse resulted on Friday, 8 July. Back in the US, discussions were held between the parties the following Monday morning. A resumption of talks was agreed, and the trilateral negotiations continued in Washington on Thursday, 14 July. Gates was in Toronto and said that he did not expect the threat of an antitrust suit from the US DoJ to materialise: "There's no antitrust action. The last five years, various groups in the US government have been looking at the software industry to see how competitive it is and certainly getting a lot of paper from us," Gates told the conference. Bingaman had strengthened her hand by getting a DoJ attorney to find a district court where there were few cases pending, where "the dockets were thin", as she put it, and having him standing by to file if Microsoft didn't capitulate. It transpired that Salt Lake City had been chosen as the venue, perhaps the biggest possible threat to Microsoft, since Utah is Novell's home state. Neukom was unsure whether the DoJ would actually launch a case, but Gates was calling the shots. Around 4am on Friday, 15 July 1994, another impasse was reached. Bingaman suggested calling Gates, but no progress was achieved with him, in a brief conversation. It seemed that the distance between the two sides was too great to be resolved. Around a dozen lawyers had been arguing over the terms of a settlement. The Washington Post reported that "sources" (described as "close to the company") noted that "Microsoft is a 'pragmatic company' and had settled in previous cases, even when they thought they were right". Microsoft was evidently preparing the ground to climb down. About midday, Bingaman called another trilateral meeting, and progress was made. Bingaman then said she wanted to talk to Gates again: "He's the ultimate decision maker". Both the DoJ and the European Commission (Claus Ehlermann represented DGIV) were resolute that they would both proceed against Microsoft unless a satisfactory agreement could be reached. There then followed an hour-and-a-half of negotiation by speaker-phone, with lawyers making quick notes as the discussions progressed, sometimes leaving the conference room to confer privately. Finally, Gates said: "I can live with this." A settlement now would only really be possible if there were an immediate and serious time-related sanction against Microsoft. Since there isn't, Microsoft is likely to take advantage of the substantial delay during an appeals procedure, with quite likely no interim injunction in place to hold it back from further monopolisation. Furthermore, there is no great PR advantage to Microsoft in settling, since it would be unable to get such feeble terms again. Lloyd Constantine, of Constantine & Partners in New York, points out that Judge Posner is likely telling each side about the weaknesses of their arguments, and how the appellate court in DC would react to the case. However, it may be the Supreme Court that considers any appeal, bypassing the Court of Appeals, as we have previously suggested. ® Complete Register Trial coverage


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