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Microsoft finds defender in US Justice Department

Policy shift shows different view of antitrust stance

WASHINGTON -- Nearly a decade after the Clinton administration began a landmark effort to break up Microsoft, the Bush administration has adopted a different course by repeatedly defending the company both in the United States and abroad against accusations of anticompetitive conduct, including the recent rejection of a 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 world's largest software maker.

In the most striking recent example of the policy shift, the top antitrust official at the Justice Department last month urged state prosecutors 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 O. 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, federal 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 US District Court in Washington. It is expected to be discussed at a hearing on the decree in front of Kollar-Kotelly this month. The memo illustrates the political transformation of Microsoft, as well as the shift in antitrust policy between officials appointed by former President Clinton and by President Bush.

"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 who is writing a book about the Microsoft case. "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 to comment about the complaint.

Bradford L. 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 was 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 federal 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 federal 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 then promptly settled it.