This decline in Microsoft advantage against its peers and competitors is reflected in these current times devaluation (are they taking the shackles off Microsoft because they know MSFT is now in a position to have to fight for their corporate lives?):

http://www.nytimes.com/2007/06/10/business/10microsoft.html?ei=5065&en=a6f3dd79c5258b91&ex=1182052800&partner=MYWAY&pagewanted=print

June 10, 2007

Microsoft Finds Legal Defender in Justice Dept.

http ://www.nytimes. com/2007/06/10/business/10microsoft.html?ei=5065&en=a6f3dd79c5258b91&ex=1182052800&partner=MYWAY&pagewanted=print

June 10, 2007
Microsoft Finds Legal Defender in Justice Dept.
By STEPHEN LABATON

WASHINGTON, June 9 — Nearly a decade after the government began its landmark effort to break up Microsoft, the Bush administration has sharply changed 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 retrenchment 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, Thomas O. Barnett, an assistant attorney general, had until 2004 been a top antitrust partner at 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.

Mr. 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.

Mr. 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, which contends that Google’s desktop search tool is slowed down by Microsoft’s competing program, has not been made public by Google or the judge overseeing the Microsoft consent decree, Colleen Kollar-Kotelly of the Federal District Court in Washington. It is expected to be discussed at a hearing on the decree in front of Judge Kollar-Kotelly this month.

The memo illustrates the political transformation of Microsoft, as well as the shift in antitrust policy between officials appointed by President Bill 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 Mr. 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,” Mr. 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 handed down early in the Bush administration. The ruling, in 2001, 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.

Google complained to federal and state prosecutors that consumers who try to use its search tool for computer hard drives on Vista were frustrated because Vista has a competing desktop search program that cannot be turned off. When the Google and Vista search programs are run simultaneously on a computer, their indexing programs slow the operating system considerably, Google contended. As a result, Google said that Vista violated Microsoft’s 2002 antitrust settlement, which prohibits Microsoft from designing operating systems that limit the choices of consumers.

Google has asked the court overseeing the antitrust decree to order Microsoft to redesign Vista to enable users to turn off its built-in desktop search program so that competing programs could function better, officials said.

State officials said that Mr. Barnett’s memo rejected the Google complaint, repeating legal arguments made by Microsoft.

Before he joined the Justice Department in 2004, Mr. Barnett had been vice chairman of the antitrust department at Covington & Burling. It represented Microsoft in the antitrust case and continues to represent the company.

In a recent interview, Mr. Barnett declined to discuss the Google complaint, noting that the decree requires complaints by companies to be kept confidential. He defended the federal government’s overall handling of the Microsoft case.

“The purpose of the consent decree was to prevent and prohibit Microsoft from certain exclusionary behavior that was anticompetitive in nature,” Mr. Barnett said. “It was not designed to pick who would win or determine who would have what market share.”

“We want to prevent Microsoft from doing those things that exclude competitors,” he added. “We also don’t want to disrupt the market in a way that will be harmful to consumers. What does that mean? We’ve never tried to prevent any company, including Microsoft, from innovating and improving its products in a way that will be a benefit to consumers.”

Prosecutors from several states said that they believed that Google’s complaint about anticompetitive conduct resembled the complaint raised by Netscape, a company that popularized the Web browser, that was the basis of the 1998 lawsuit.

Richard Blumenthal, the Connecticut attorney general, declined to talk about the substance of the complaint, or which company made it. But he said the memo from Mr. Barnett surprised him.

“Eyebrows were raised by this letter in our group, as much by the substance and tone as by the past relationship the author had had with Microsoft,” said Mr. Blumenthal, one of the few state prosecutors who has been involved in the case since its outset.

“In concept, if not directly word for word, it is the Microsoft-Netscape situation,” Mr. Blumenthal said. “The question is whether we’re seeing déjà vu all over again.”

The administration has supported Microsoft in other antitrust skirmishes as well.

Last year, for instance, the United States delegation to the European Union complained to European regulators that Microsoft had been denied access to evidence it needed to defend itself in an investigation there into possible anticompetitive conduct. The United States delegation is led by Ambassador C. Boyden Gray, who had worked for Microsoft as a lawyer and lobbyist.

Robert Gianfrancesco, a spokesman for the delegation, said that Ambassador Gray had not formally removed himself from involvement in Microsoft issues but was not involved in the complaint to European regulators, which was handled by other American diplomats in the delegation.

In December 2005, the Justice Department sharply criticized the Korean Fair Trade Commission after that agency ordered major changes in Microsoft’s marketing practices in Korea.

And in 2004, the Justice Department criticized the European Commission for punishing Microsoft for including its video and audio player with its operating system.

Antitrust experts attribute the Bush administration’s different approach to Microsoft to a confluence of political forces as well as significant changes in the marketplace.

A big factor has been the Bush administration’s hands-off approach to business regulation. For its part, Microsoft, which spent more than $55 million on lobbying activities in Washington from 2000 to 2006 and substantially more on lawyers, has become a more effective lobbying organization.

“The generous and noncynical view is that there has been a fundamental change in philosophy about the degree to which antitrust should be used to regulate business activity,” said Andrew I. Gavil, an antitrust law professor at Howard University who is a co-author of the Microsoft book with Professor First, the New York University law professor. “In the Microsoft case, you can see how that change has manifested itself.”