Microsoft and the US justice department have reached a tentative agreement to settle their long-running antitrust case, and state attorneys general were reviewing terms of the deal, according to people familiar with the talks.
Terms of the prospective settlement were closely guarded, and people close to the negotiations cautioned that precise language was still being worked out even between Microsoft and the justice department.
But groups that have been pressing for tough sanctions for Microsoft immediately accused the Bush administration of "selling out" by seeking weak penalties. The antitrust suit revolved around accusations that Microsoft had used its monopoly position on the computer desktop to control the internet browser market as well.
US district judge Colleen Kollar-Kotelly has set a deadline of tomorrow to reach a settlement. All sides - including state prosecutors from Iowa, Connecticut, New York and Wisconsin - met late into last night with mediator Eric Green in Washington.
The attorneys general from the states that sued Microsoft for antitrust violations were weighing whether to sign onto the deal, sources close to the mediation talks said. Charles James, the assistant US attorney for antitrust, disclosed the agreement to the attorneys general yesterday and said Microsoft would accept the terms, the sources said.
The computer industry has eagerly been monitoring the talks, looking for a possible settlement and hoping it would combine with the release of Microsoft's new Windows XP operating system to invigorate the lagging industry that has helped drag down the stock market.
The considerations in the coming days by state attorneys general and their top lawyers are important. The case was nearly settled during previous negotiations under US circuit court judge Richard Posner, who hinted afterward that states had stymied an agreement by seeking tough penalties that Microsoft rejected.
Sources said the prospective agreement would ban Microsoft from drawing up restrictive contracts that force computer manufacturers to buy versions of Windows with new features, but it would allow for financial incentives such as discounts to make those versions more enticing.
It would also force Microsoft to reveal the parts of the Windows blueprint that relates to Internet Explorer, but not to the operating system as a whole.
Microsoft officials have warned they would not accept any broad prohibitions against bundling new features into Windows.
The chairman of Microsoft, Bill Gates, has hinted in recent days of successful negotiations, saying last week that he was "fairly optimistic" an agreement would be reached.
However, the Washington-based Computer and Communications Industry Association charged the administration was not pushing for tough enough penalties, such as requiring Microsoft to disclose its source code blueprints for its flagship Windows operating system.
"The justice department is not settling this case, it is selling out consumers, competition, and all those who want a vibrant, innovative high tech industry contributing strength to our economy," the group's president, Ed Black, said in a statement.
