Microsoft talks with government hit new impasse Gates apparently tells his lawyers to withdraw earlier concessions


WASHINGTON -- Negotiations between the Microsoft Corp. and state and federal justice officials collapsed yesterday, apparently after the company's chairman, Bill Gates, ordered lawyers to withdraw earlier concessions.

Justice Department and state officials said they intended to file a sweeping antitrust suit tomorrow.

In a statement late yesterday, the Justice Department said that the discussions ended yesterday without a resolution. "At this point, they are not expected to resume," the statement read.

Microsoft said in a statement that the company had made "a number of significant offers to address the government's concerns, but we cannot agree to their demands without undermining our ability to innovate for consumers."

Microsoft also said it would begin shipping Windows 98, its updated operating system, to computer manufacturers tomorrow.

A top government official involved with the talks said they collapsed "because Microsoft didn't put anything of substance on the table." But Microsoft said it made "extremely far-reaching concessions in the area of contracts with Internet service providers."

The federal and state governments, including Maryland's, had planned to file their antitrust suits last Thursday. The suits, described as being very similar, assert that Microsoft has used predatory pricing policies and contracts to extend its monopoly in computer operating systems to other areas of the computer industry, particularly the Internet.

They also challenge Microsoft's practice of bundling applications programs, especially its Internet Explorer browser, with its Windows operating system, because they say it leaves companies that make similar programs with no viable way to compete.

Microsoft had been negotiating with the Justice Department and the state attorneys general while carrying out a public relations campaign to block the litigation.

As state and federal officials gathered Thursday in Washington to announce the filing of their suits, Microsoft offered new concessions that won the company a reprieve. Principal among them was an offer to negotiate whether computer makers would be allowed to determine some of the features that appeared on the Windows desktop, the main screen first seen by users.

Talks opened at the Justice Department Friday and continued yesterday in the offices of Microsoft's Washington law firm, Sullivan & Cromwell. Two senior government officials who were involved with the talks said that Microsoft, on order of Gates, had retracted some of the concessions it had put forward the day before.

Pub Date: 5/17/98

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