The antitrust settlement between Microsoft and the Department of Justice (DOJ) needs to be amended because it doesn't ensure competition between Microsoft and its rivals, the state of Massachusetts and an IT industry group argued yesterday.

Microsoft should be made to release the code for its Internet Explorer (IE) browser and permit original equipment manufacturers (OEMs) to make any of its functions invisible to end users, argued Steven Kuney, lawyer for the state of Massachusetts, before the US Court of Appeals for the District of Columbia Circuit.

Massachusetts is the sole remaining state appealing the Microsoft antitrust settlement, along with two industry groups – the Computer & Communications Industry Association (CCIA) and the Software & Information Industry Association (SIAA).

CCIA lawyer Robert Bork said that a "special master" should be appointed by the court to investigate any reported violations of the settlement, Microsoft and DOJ lawyers countered that the existing antitrust settlement was "clear and consistent."

The court system doesn't work fast enough to deal with potential violations of the settlement, thus the need for a special master, Bork said: "We need a fast-acting remedy," he added. "This is a fast-moving area of technology."

However, the judges asked why courts weren't adequate to resolve the issue and why a special master is needed when no evidence exists that Microsoft has violated the settlement.

Microsoft has fully acknowledged earlier court antitrust findings and is working to comply with those court orders, said Brad Smith, senior vice president and general counsel for the company: "We took steps together with the government to rectify each and every one of those issues," Smith said after the hearing.

'Not enough'

Bork and Kuney argued that the requirement for Microsoft to separate the IE code from the Windows operating system isn't doing enough to encourage OEMs to replace it with competing browsers. Microsoft wasn't required to completely remove the IE code because it adds functionality to application such as the Help program, but Kuney argued that Microsoft should have to remove IE identification from any functions that could pop up on users' screens.

Removing the IE icon from desktops isn't enough to encourage competition, Bork said. He argued that settlement requirements for Microsoft to disclose some of its APIs were inadequate. The result is a settlement that was "totally inadequate," he said. "This decision doesn't remedy a thing that Microsoft did," Bork added. "The government had this case cold and there was no reason to negotiate away what it did."

Massachusetts' Kuney asked for stiffer remedies requiring, among other things, that Microsoft open up the code of IE to competitors. The browser enjoys a 90-plus per cent market dominance, he added. "In order to remedy the problem, something needs to be done about the current browser dominance," he said.

But Judge Harry Edwards asked if making IE's source code available would make IE "totally ubiquitous."

"You would have placed Internet Explorer everywhere with your open-source remedy," Edwards told Kuney. But Kuney answered that the remedy would create new versions of IE controlled by Microsoft competitors.

More sanctions

Lawyers on both sides faced tough questions from the six Appeals Court judges, prompting one observer to predict after the hearing that the court would send the settlement agreement back to the District Court for more sanctions. The judges did not reject the open-source remedy out of hand, although Microsoft lawyers called it extreme, said law professor and Microsoft critic Robert Lande: "It looks like they're going to second-guess what they District Court did," he said.

Judge Judith Rogers asked Deborah Majoras, deputy assistant attorney general for the DOJ's Antitrust Division, how the settlement has denied Microsoft the fruits of its anti-competitive actions. Majoras answered that the settlement would prevent Microsoft from taking similar steps in future: "To say it does nothing to remedy Microsoft's conduct is simply wrong," she said, defending the settlement.

"What does that have to do with the fruits of the unlawful conduct?" Rogers asked. "It's hard to say Microsoft gained nothing by its unlawful conduct."

But the original antitrust trial didn't find enough evidence to decide how much Microsoft hurt middleware competitors such as the Netscape Navigator browser and Java through anti-competitive actions, added Microsoft lawyer Michael Lacovara. Much of the market share gained by IE could be attributed to healthy competition, he suggested.

He did agree that it was nearly impossible to figure out how much marketshare Netscape lost because of anti-competitive behavior.

Representatives of both the state of Massachusetts and the CCIA said after the hearing that they were encouraged by the judge's questions. "Microsoft's monopoly has not been adversely affected – in fact, it's grown," said Edward Black, executive director of the CCIA. "The settlement has not had an impact; has not restrained this company."

Massachusetts' Attorney General Tom Reilly was happy to see the Court of Appeals take on the case, because it shows that a huge corporation like Microsoft can be held accountable, he said after the hearing. But the hearing showed that Microsoft still doesn't understand the antitrust complaints against it, Reilly said.

"They still don't get it," Reilly added. "They still don't think they have done anything wrong."

Microsoft's Smith argued after the hearing that the antitrust settlement was doing what it intended to do: "The settlement agreement was intended to give consumers more choices and that's precisely what it's doing." He couldn't say how many OEMs are installing competing browsers on their hardware.