Microsoft Chief Executive Steve Ballmer spoke about the company’s antitrust litigation during an interview Tuesday with the Chicago Tribune editorial board. This excerpt has been edited for clarity.
What kind of drain has the litigation been on Microsoft?
Ballmer: We’d still love to settle the class-action cases. (U.S. District Judge Frederick) Motz gave us a lot of homework to go back and do. We’re proceeding through the process.
On the non-settling states: There are nine states plus the District of Columbia. … We’ve got the right settlement. We are disappointed that the other (nine) states and D.C. chose not to participate. The proposal they’ve put out for remedy is, frankly, in my view absolutely unbelievable. That’s probably all I should say since we’re on the record today. But it is absolutely unbelievable in terms of how far it overreaches relative to what the Court of Appeals said, and how far it overreaches in terms of what it would do to debilitate our company. I mean it … would debilitate our company.
There is nothing punitive in the antitrust law. That’s not what things are supposed to do. (A settlement) is supposed to address the issues that the U.S. Department of Justice has taken a look at. I think most of the language probably in the proposal from the non-settling states was drafted by our competition. You see some of that back forth in the legal wrangling last week in terms of who’s going to testify and who’s not going to testify. But it is really to me — what shall I say — it has saddened me personally quite a bit about this state of affairs in the United States. The whole lawsuit has been an amazing experience.
But after working so hard on the direct suggestion of the judge and with the mediator to settle with the Department of Justice, and then to have these non-settling states not only ask for more than the court of appeals gave, not only ask for more than the Justice Department settled for, not only ask for more than (U.S. District Judge Thomas Penfield) Jackson gave, and he’s been overturned in large measure since then … they’ve asked for even more and a remedy that would literally debilitate our company. That makes me very sad. Let me just say it that way.
What do you mean by “debilitate”?
For the purposes of today’s meeting, I should probably not go into a lot of detail, but suffice it to say that if you actually read through the proposal by the (non-settling) states, I would not know how to comply with it. If that order was entered today, I wouldn’t even know how to comply, let alone innovate. There are kind of different levels of this thing. The thing we have been fighting for all along is the freedom to innovate, the freedom to continue to integrate new capabilities into Windows. And the Court of Appeals actually upheld us very well on that. They said, “Yeah, you can put anything you want into Windows.” But then they wrote down, “There’s these 12 things that you did” — most of them had to do with contracts and the way we contract for things — “that you can’t do. And by the way, you’ve got to let your OEMs hide access to Internet Explorer.” That’s what the Court of Appeals said. We were upheld on that.With the U.S. Department of Justice, we agreed on something very carefully crafted that still lets us put things into Windows but gives us additional obligations in terms of disclosure. For example, additional contractual obligations in terms of our work with third parties. We signed up for that because we wanted to get this thing behind us.
The (nonsettling) states’ proposal, well, it says we can put anything in. But it (also) says that anybody has to be able to take anything out, in any way, at any time, in any shape and in any form. Software is not engineered that way. It’d be like going out to somebody who built the Space Shuttle and saying, “We want the Space Shuttle designed so that any part can be taken out, and it’ll still fly, and it’ll fly right. Oh, and any part should be able to be replaced. See that screw? That screw has got to be able to be arbitrarily replaced. And no astronaut has to be in any jeopardy.” It is the logical equivalent if you just read the (proposal). I wouldn’t even know how to comply.
So, (the states) have sort of cloaked (their proposal) in this “See, we still let Microsoft innovate” kind of stuff, and I’m only on paragraph 1, by the way. I haven’t gotten to paragraph 19 or 20 or whatever the heck number of paragraphs are in the thing.
So, the ability to continue to do engineering of new products and comply with the order — Windows products, I should say — would be nil.
If you just read the agreement, it was clearly drafted. You can tell each competitor who had input. Because there are specific parts of Windows called out that say, “This includes, but is not limited to, foo and bar and blee and blah.” And why was that list of things picked? Well, it was picked because there was a certain set of competitors involved in drafting.
Anyway, it is outrageous. It is beyond … well, we haven’t had a lot of public commentary about this because I think it is appropriate for us to go through that as a part of a trial process. But it is truly beyond outrageous in terms of the debilitating effect — forget on Microsoft. I guarantee you: It will dramatically harm consumers.
The level of innovation and our ability, our basic ability, to keep Windows in the marketplace, as crazy as that sounds, will be threatened. And I’m sure there will be a lot more to talk about in the course of the trial period. I’ll stop there. I should stop there, or else I’ll be sorry.
It sounds as if you don’t think compromise is possible.
Why should we? We did compromise with the U.S. Department of Justice. We did. I mean it’s a little bit like saying, “OK, negotiate your best deal on a house, and then let somebody else come in and say, ‘Yeah, but we own the garage, so let’s negotiate again.'” It’s not double jeopardy in some sense, but it feels a lot like whatever it was the framers were supposed to be protecting (us against). We negotiated a settlement and it turns out the only people who have authority over this stuff in the United States is the U.S. federal government. I mean, the U.S. federal government has the national responsibility for enforcing the antitrust laws, and we reached a tough but fair settlement.
It’s not even fair to the U.S. government at this stage for us to go back and say, “OK, West Virginia, let’s go cut a private settlement with West Virginia.” What do you want us to go back and tell the U.S. Attorney General? “Sorry, you’re not as important as the State of West Virginia. They’ve got to get a better deal.” I don’t even know how to do it if we wanted to do it.
So, I’m not saying we wouldn’t like to settle things. That was what we wanted to do, but now we’re almost in an impossible Catch-22 position where we did settle with most of the biggest litigants. We settled with them. And you know, we have competition in California who won’t settle. And I think our competition in California gets to decide what goes on in the state of California, which I find unfortunate. So, I can’t say that we’re against settlement, but I don’t know how you get from here to there, at least not with the non-settling states.
What about providing a product that offers some sort of personal Windows that doesn’t use HTML and doesn’t have a browser? Something like the old APIs.
I’ll say two things about that. That would be a completely noncompetitive, ridiculous piece of software to have on the market, and consumers would be hurt by the introduction of that product.
And let me also say that for the non-settling states, that wouldn’t be good enough. Their proposal is much more draconian and extreme than that. They say it’s not just browsing. Their proposal says, “Suppose somebody comes along one day and says, ‘We want to take out the Windows files system, we should be able to do that.’ And someone else says, ‘We want to take out the Windows control panel.’ We should be able to do it. We want to be able to take out the Windows graphic system.” And all of these things they want us to sign up that they will be infinitely replaceable, that there will be full technical disclosure that allows it, and when the replacement occurs, it’ll perform exactly as well — whatever that means, because it’s different functionality.
So, what you said I would consider ridiculous and bad for the consumer. And it’s still mild by comparison to what the non-settling states have asked for.
Hey, it was a hard-to-hear compromise, and we did it. We locked up deeply with the Department of Justice and a couple of the states, and we did it. I don’t want to sound just hyperbolic, but at this stage is it fair to anybody? Is it fair to us or to the non-settling states? And we went to our limit. It’s not like the U.S. Justice Department said, “All right, we’re not going to push you.”
The fact of the matter is, if you really want to know, we still might have done better just to litigate even with the Department of Justice. Read that Court of Appeals ruling. There were 12 things they found problematic. Those 12 things are much, much smaller than what we agreed to with the Department of Justice. Judge Jackson was clearly overturned. The non-settling states want more than Judge Jackson. More! He was overturned. They want more. It makes it hard to understand what compromise looks like.
And I’m sounding a little extreme this morning because I probably had too much iced tea or something, but the fact is that I believe in what I’m telling, and I don’t know what the process would look like from here to there.
