"I regret to announce the end of my efforts to mediate the Microsoft antitrust case ... After more than four months, it is apparent that the disagreements among the parties concerning the likely course, outcome, and consequences of continued litigation, as well as the implications and ramifications of alternative terms of settlement, are too deep-seated to be bridged," mediator Richard Posner said in a statement issued Saturday.
Microsoft issued a statement of regret, noting that it was "disappointed" that a settlement could not be reached. Contrary to reports in the media spurred by comments made by Judge Jackson two weeks ago, Microsoft had been brokering a settlement for over four months, and had submitted almost twenty proposals. Microsoft president Steve Ballmer told employees last week that the company was doing everything it could to settle the case.
"\[Microsoft chairman Bill\] Gates said that they devoted over 3,000 hours all told to the effort over the past four months and that Microsoft offered significant concessions,'' a Microsoft spokesperson said over the weekend.
"We went the extra mile to resolve this case," Gates said. "But the government would not agree to a fair and reasonable settlement that would have resolved this case in the best interests of consumers and the industry ... Microsoft offered significant concessions in the interest of ending this case. Ultimately, it became impossible to settle because the Department of Justice and the states were not working together. Between them, they appeared to be demanding either a breakup of our company or other extreme concessions that go far beyond the issues raised in the lawsuit."
The trick for the government, of course, was securing a settlement that didn't leave any loopholes for Microsoft to wiggle around. The company abused some weak legal wording in its 1994 consent decree to bundle Internet Explorer with Windows, stating that such "innovation" was clearly allowed under the terms of the agreement. The government disagrees, arguing that pushing IE into Windows was illegal because it harmed competitors, partners, and consumers while providing no technical improvement to the product that could have easily been achieved otherwise. Representatives for the DOJ say privately that they were not interested in being "Bingamanized," or fooled by Bill Gates as the DOJ's Anne Bingaman was when she accepted the Microsoft settlement that led to the previous consent decree.
"We would have preferred an effective settlement to continued litigation,'' said assistant attorney general Joel Klein in a statement over the weekend. "But settlement for settlement's sake would be pointless." Klein, who is leading the charge against Microsoft, thanked mediator Richard Posner for his work.
With the collapse of the settlement talks, Judge Jackon's ruling is up next, followed by months of debate over an eventual punishment. Microsoft will fight strenuously to avoid being broken up, though the company's recent statements suggest that the government had already backed off from that stance during the mediation process. Various behavioral remedies are still possible, however, and as mentioned previously, Microsoft can appeal this case for years to come.
"We will seek a remedy that prevents Microsoft from using its monopoly in the future to stifle competition, hamper innovation and limit consumer choice," said Klein.
For now, it's just a waiting game. With the collapse of the talks, both sides can simply sit back and wait for the judge to deliver what will surely be a stinging verdict against the company. For Microsoft, the failure has sent its stock tumbling as public perception of the company sinks by the day. And ironically, as Microsoft's power is ebbing in various ways across the industry, the antitrust case may to more to usher in a post-Microsoft world than anything Linux, AOL, or Sun Microsystems could have done on their own.
"Bill \[Gates\] and I and our entire executive team invested countless hours in the mediation process, because we believe that a settlement would be good for everyone,'' said Microsoft president and CEO Steve Ballmer. "We continue to believe that we have a strong legal case, and that the judicial system will ultimately rule in our favor. We would prefer to resolve this case through settlement, but we must protect our right to bring the best products for consumers to the fast-changing marketplace.