Menu

Antitrust Judge Slams Dead Microsoft Music Deal

The federal judge overseeing Microsoft Corp.'s business practices scolded the company Wednesday over a proposal to force manufacturers to tether iPod-like devices to Microsoft's own music player software.

Microsoft abandoned the idea after a competitor protested.

In a rare display of indignation, U.S. District Judge Colleen Kollar-Kotelly (search) demanded an explanation from Microsoft's lawyers and told them, "This should not be happening."

Legal and industry experts said Microsoft's demands probably would have violated a landmark antitrust settlement the same judge approved in 2002 between the company and the Bush administration. The government and Microsoft disclosed details of the dispute in a court document last week.

The judge said Microsoft's music-player proposal — even though it was abandoned 10 days later — "maybe indicates a chink in the compliance process." She made her remarks during a previously scheduled court hearing to review the adequacy of the settlement.

The disputed plan, part of a marketing campaign known as "easy start," would have affected portable music devices that compete with Apple Computer Inc.'s popular iPod (search). It would have precluded makers of those devices from distributing to consumers music software other than Microsoft's own Windows Media Player (search), in exchange for Microsoft-supplied CDs.

"I do want to know how this happened," the judge said. "It seems to me at this late date, we should not have this occur."

She did not indicate she plans to punish Microsoft, but her comments were remarkable because she generally praises efforts by the company and government under the settlement.

A Microsoft lawyer, Charles "Rick" Rule, blamed the proposal on a newly hired, "lower-level business person" who did not understand the company's obligations under the antitrust settlement. The agreement constrains Microsoft's business practices through late 2007.

"This is an issue that Microsoft is concerned showed up," Rule said. He added that Microsoft regrets the proposal ever was sent to music-player manufacturers and that the company was "looking at it to make sure this is a lesson learned."

Responding to related complaints by Microsoft's competitors, the European Union (search) ordered the company last year to sell a version of its dominant Windows operating system without the built-in media player software.

Microsoft appealed the decision, which included a $613 million fine, but now sells a Windows version in Europe without its music software.

A Justice Department lawyer, Renata Hesse, said the government will discuss with Microsoft its legal training for employees about antitrust rules. The government previously said the incident was "unfortunate" but said lawyers decided to drop it because Microsoft pulled back.

"I think we, like you, believe it should not be happening at this point," Hesse told the judge.

Microsoft wants consumers to use its media software to transfer songs onto their portable music players from Internet subscription services, such as those from Napster Inc., RealNetworks Inc. and Yahoo! Inc. Each company currently offers its own media software.

Microsoft and others have struggled to match the runaway success of Apple's iPod player and iTunes music service.