Department of Justice Seal

Attorney General John Ashcroft Transcript

News Conference with Assistant Attorney General Charles James
DOJ Conference Center
November 2, 2001

ATTY GEN. ASHCROFT: Good morning.

Today we are announcing a strong, historic settlement reached by the Department of Justice and the Microsoft Corporation that will put an end to Microsoft's unlawful conduct, bring effective relief to the marketplace, and ensure that consumers will have more choices in meeting their needs of computing and working with their computers. We're filing this settlement today with the District Court -- (speaking aside) -- as a matter of fact, I think you've just concluded the filing -- (returning) -- in accordance with the court directive that the settlement be sought and filed by today.

A competitive software industry is vital to our economy, and effective antitrust enforcement is crucial to preserving competition in the constantly changing high-tech arena. With the proposed settlement being announced today, the Department of Justice has fully and completely addressed the anti-competitive conduct that was outlined by the Court of Appeals against Microsoft.

Through a broad range of disclosure and nondiscrimination and non-retaliatory and enforcement provisions, this proposed framework and this settlement not only resolves the department's competitive concerns but also does so in a quick and responsible manner. The proposed settlement puts in place enforcement measures that will require Microsoft to disclose internal operating system interfaces and protocols. These disclosures in turn will create opportunities for independent software vendors to develop products that will be competitive with Microsoft's products.

The settlement also gives computer manufacturers flexibility to contract freely with competing software developers, and to place on Microsoft's operating system their middleware products, such as browsers, instant messaging software, and media players. Additionally, computer manufacturers and software developers will be free to do business with Microsoft's competitors without fear of retaliation.

This settlement is the right result for consumers and for businesses, the right result for the economy, and the right result for government. It provides prompt, effective, certain relief for consumers and removes the uncertainty in the computer market, a critical factor in today's economy.

I want to express my gratitude to the Antitrust Division lawyers and to the entire team at the Justice Department for obtaining safeguards to protect competition that extend beyond the safeguards signaled in the Court of Appeals judgment on June the 28th, 2001. And I want to thank the Antitrust Division for all their hard work on this case. The American people can be confident not only of the hard work that they have done, but of the result that they have achieved.

I would like now to introduce Charles James, the assistant attorney general of the Antitrust Division. Mr. James has been a dedicated and tireless advocate for consumers and for competition in this case. But this case is only a chapter in his experience in working for consumers. His experience is vast with antitrust enforcement from a governmental perspective, promoting the interests of consumers, 22 years of practice in four separate decades regarding antitrust.

He served in the '70s, in the '80s, in the '90s, and now in this decade; has served with distinction in the Federal Trade Commission in antitrust -- in the antitrust arena, as well as here in the Justice Department, in several administrations.

It's my pleasure to thank him for the excellent work that he's done and to introduce him now to make remarks. Charles?

MR. JAMES: Thank you, Attorney General Ashcroft, for those very kind words. And on behalf of the Antitrust Division -- in particular, the men and women who have devoted such tremendous effort to the Microsoft case -- we certainly appreciate your support in this endeavor.

The settlement that we're announcing today brings to the conclusion a very long and hard-fought battle with Microsoft Corporation, terminating one of the most significant government monopolization cases in the Antitrust Division's history. The settlement will promote innovation, give consumers choice, and provide computer manufacturers and the industry with more certainty as they go forward in marketing their products. We think this -- that this consent decree will remedy the problems that were caused by Microsoft's unlawful conduct, prevent the recurrence of those problems, and restore competition in the software industry.

The proposed decree stops the offending conduct by prohibiting actions by Microsoft to impede the implementation of competing middleware products. Those practices are affirmatively prohibited by the decree.

The decree prevents recurrence by ensuring that the computer manufacturers, who in many respects stand as proxies for the consumer, are able to purchase Microsoft operating systems on a uniform and non- discriminatory basis and do so without fear of retaliation from Microsoft as they implement competing middleware products.

Very importantly, the decree will require Microsoft to provide technology that will allow computer manufacturers to actually replace Microsoft products on a function-by-function basis deep inside the operating system platform.

This is through functions such as add/delete and default requirements.

Additionally, the decree provides for a full-time, on-site enforcement team of independent computer experts that will have full and complete access to Microsoft soft-source code, records, facilities, personnel. And they will have the ability to monitor compliance and resolve disputes. Another critical enforcement provision is that the court, upon a finding of serious violations of the decree, will be able to extend the decree by up to two years.

Finally, the decree restores competition by requiring Microsoft to document and disclose internal interfaces and protocols, to permit middleware software developers to create products that are fully competitive with middleware functions that Microsoft offers in its integrative operating systems.

The settlement is consistent with the relief we believe we might have obtained in litigation. This settlement, however, has the advantages of immediacy and certainty. Given the very fast pace of developments in the computer industry, we place a very high premium on getting effective relief right now.

We're very pleased with the results here, salute the men and women of the Antitrust Division who produced them. They've worked tirelessly for over three years on this project. And credit also must be given to Judge Kollar-Kotelly, who pressed the parties to focus on settlement and insisted that we do so in the crucible of a tight time frame. The negotiations were hard-fought. We think that we produced a very, very positive result here, and we couldn't be more pleased with the outcome.

And I think we'll take a few questions.

Q Mr. James, how many of the states have you got on board?

MR. JAMES: Well, as the states indicated in court this morning, we were negotiating this decree until very late yesterday in the day. They are going to take until Tuesday to go through a process of due diligence. I can say that many of the states were on the courthouse steps and made very positive statements about some of the provisions of the decree. And it's my hope that many of them will join with us because it's very clear that this relief is in the public interest.

Q How have the events of September 11th, if any, contributed to the impetus for a settlement, as opposed to going back to court?

ATTY GEN. ASHCROFT: Let me just indicate that we believe the relief which we will be able to grant hereby ending the illegal conduct of the Microsoft Corporation and providing a framework of competition and opportunity which will be good for this industry is the kind of relief we have been seeking from the outset. And we believe because it exceeds the kind of relief that was signaled in the Court of Appeals opinion of earlier this year, that it is a very strong outcome, and an outcome which would be a good outcome whether or not September 11th had taken place.

Q You said that the relief addresses all of the scope of the Court of Appeals opinion. The Court of Appeals specifically said that commingling of code between the operating system and the browser was anti-competitive, and recommended that that be unbundled. Could you point to where in this decree that is addressed?

ATTY GEN. ASHCROFT: I'm going to let Mr. James handle the technical -- for obvious the reasons -- the technical components of the decree, and he'll be available to do that.


Q Microsoft, in all these years, has never once admitted that it had engaged in illegal conduct. Even up until recently, it had never admitted that the Court of Appeals opinion was accurate that it had indeed violated the law. How can you ensure that the company will follow all of the provisions of this agreement when it still hasn't admitted it did anything wrong?

ATTY GEN. ASHCROFT: Well, the key is not Microsoft admitting it; the key is that the courts have found it and that the District Court found it and the appellate court found it. And we know what the practices are, and they are the prohibited practices. And the settlement will not require that Microsoft reach legal conclusions, but it will require that Microsoft engage in conduct which will eliminate the kind of conduct which we believed, which the court concluded and, on appeal, the court was affirmed in concluding, was illegal. And we believe that that's the right outcome in this case.


Q General Ashcroft, when was the White House informed of the settlement? And did the White House in any way go over or try to influence the details that were reached?

ATTY GEN. ASHCROFT: I have -- I mentioned yesterday that I thought we were settling the case today because we thought we had reached the fundamentals of the settlement that would be presented this morning, and in no respect did the White House seek to shape or influence the outcome in a way that -- did they seek to shape or influence the outcome.

Q General Ashcroft?


Q Can you tell us if you think the FBI was wrong not to warn the public of threats to the Bay Bridge -- bridges in California yesterday? And was Governor Davis wrong to do so last night?

ATTY GEN. ASHCROFT: Well, you know, we have processed hundreds and hundreds and hundreds of threats, and we make an assessment of threats. And there are times when I believe that both the credibility of the threat and the scope or nature of the threat require and provide a basis for our speaking to the public about a threat.

I have always said, and it is the position of this administration, that when there are specific threats, that we share those with local officials. We believe that the notice sent to law enforcement agencies properly provided and carried out the responsibility of the FBI and this administration as it related to the items you've mentioned.

And I think -- we understand in our effort, we always have to make a judgment about public safety and the degree to which what we say affects public safety, either by encouraging preparedness, or at the risk of somehow eliciting a panic. We try to make a judgment about those based on the two factors -- the scope of the threat and the credibility of the threat, and we believe the action we took was appropriate.

Yes, sir?

Q General Ashcroft, how do you respond to criticism, that began forming mid-, late week, that you are here agreeing to something weaker than that was proposed by Judge Jackson, weaker even than that Microsoft itself agreed to during mediated talks with Judge Posner, and in a kind shrill term, that you're not settling but selling out?

ATTY GEN. ASHCROFT: I'm not what?

Q Settling, but selling out.

ATTY GEN. ASHCROFT: That's totally false. And we believe that this settlement is a very strong settlement; that it not only encompasses the relief that was signaled by the Court of Appeals, but that this has additional safeguards.

I think that's what provoked the -- or prompted the response by the states on the courthouse steps to commend parts of this judgment which were parts which carried the relief even beyond the relief signalled by the court of appeals.

Q What is your assessment -- just getting back to the investigation, what is your assessment of al Qaeda's activities in relation the recent warning that was sent out?

ATTY GEN. ASHCROFT: I don't understand your question. I'm sorry.

Q Can you tell us whether there was information that you received concerning al Qaeda's activities that led to the --

ATTY GEN. ASHCROFT: I can really say that I believe that what we did was in accordance with our traditional threat assessment process, which considers both the credibility of threats and the nature and scope of the threat, the specificity of the threat. And to say more would be inappropriate.

STAFF: Last question for the attorney general, please.

Q (Off mike) -- yesterday about the credibility of the threat. Has it been determined yet whether or not the threat is credible?

ATTY GEN. ASHCROFT: We make an assessment of all threats that come in and -- regarding their relative credibility, and we acted based on an assessment of the relative credibility and the specificity of the threat. As you well know, that -- when we have generalized threats that have high levels of credibility, I won't hesitate to ask the public to participate in a preparedness strategy for those threats.

For more specific threats, we provide not generalized information to the public, but we frequently provide information to law enforcement to law enforcement agencies. And in the context of law enforcement agencies, we would -- as has been indicated, we have a more comprehensive willingness to communicate threats across a broader range of credibility.

Thank you all very much. Mr. James and others will be here to talk to you about details. And thank you. (The attorney general departs.)

STAFF: Charles James will stay on to answer more questions.

Q Mr. James, the last time that -- (audio break) -- Bill Gates -- (off mike) -- Microsoft was entrusted with by the terms of business.

MR. JAMES: Well, with regard to the historical matter that you reference, the department did accuse Microsoft of violating the terms, and at the end of the day Microsoft was vindicated on the point of whether they violated them.

I don't think that the point of any antitrust settlement is to trust a particular individual. The point of an antitrust settlement is to have provisions in place and enforcement mechanisms that can assure the public interest will be served. We think we've accomplished that. We're not trusting Mr. Gates or any other antitrust defendant. We do that through our agreements.


Q Could you address the commingling of code provision in the court of appeals decision?

MR. JAMES: The commingling issue in the court of appeals decision related to this question of whether or not Microsoft had engaged in an anti-competitive practice by removing, in effect, its browser from the add/delete and -- function, and also having the code in place in a way that prevented it from being removed, the notion being that people wouldn't want to have two browsers in action.

Our decree addresses that in two respects. First of all, it is absolutely clear in our decree that computer manufacturers can delete Microsoft middleware products. Secondly, the company is obliged to create utilities that will be available for computer manufacturers to remove Microsoft middleware products. And also --

Q (Off mike) -- not the program itself.

MR. JAMES: Not the program itself. The program will be there.

Now, the key point here is that with regard to our relief for API disclosure and our provision about defaults, a competing middleware product will be able to come in and operate deep within the operating system in the same seamless kind of ways that Microsoft products do and deliver the same kind of functionality to the exclusion of the Microsoft product. We're not requiring that Microsoft ship the product with its middleware excised. Consumers get a choice about whether they want to use the Microsoft or the other. But the OEM manufacturer, the computer manufacturer gets to make the decision in terms of the original configuration of the machine and to create a product that will, in effect, be a different middleware platform than the Microsoft product, and the consumer can do that. So we think the commingling issue is fully addressed.

Q Sir, I'm not sure I really understand you. Will they have commingled code or won't they?

MR. JAMES: Well, in today's world, in Microsoft's -- in the design world that we sit in today, Microsoft has placed into its operating system a variety of functionalities that are not -- that are broswer-type functionalities that work seamlessly. Their code to do that will remain in place. The OEM, however, can put in a competing manufacturer's middleware product that can substitute for the Microsoft product and take over all of the functions that the Microsoft product does.

So the code is there. If the consumer, after buying the computer, after operating it of for a while, decides that they want to invoke the Microsoft product, it will be there, but the OEM will have the ability, have the ability to make that choice in the first instance. Consumers get the choice. I've never read the Court of Appeals decision to suggest that Microsoft had to take products out of -- take product code out of its software to the extent that that code operated and executed other necessary functions of the operating system.

Q Mr. James, how flexible is the Department of Justice to making any changes to this proposed consent decree to allay any concerns that the states may have in order to get them on board, or is this the deal and it's ironclad and not subject to being changed?

MR. JAMES: Our deal is the deal that we're submitting to the court for proposed approval by the court. The states, I presume, will be going through their own process. If their deal is ultimately different -- I suspect it will not be -- it would be embodied in a separate agreement.

Q So if that's the case, then what's the point of the Justice Department continuing to participate in mediation over the next three or four days?

MR. JAMES: I think the judge's point is that everyone understands that there's been a tremendous amount of expertise that we bring to the table. I'd be remiss to say that standing along the back row, with the exclusion of Mr. Wilkie (sp) there, is our team that is incredibly knowledgeable about these issues. And I think the court would like that knowledge base to be accessible to both the plaintiffs -- the state plaintiffs and Microsoft, as they continue their discussion.

Q Mr. James, what incentives do the OEMs have to add on that middleware? I ask that following up on the commingling because, as I recall from the interim decree, without, of course, the structural remedy that was proposed, there was a requirement for some kind of price discount for the operating system to the OEMs that would -- if they were to exclude particular middleware?

MR. JAMES: Well, the OEMs -- I think the practice that has emerged over the last several years in the computer industry is for developers of middleware to offer OEMs inducements. And I think that that's a fairly broad situation that's occurring in the industry. I think when Microsoft initially came out with a product that purported to have no icons on the operating system, there began a process of people sort of purchasing their way on. We would expect that to occur, and that is one of the incentives.

We think the other incentive here is this gives the OEM the opportunity to differentiate its product in meaningful ways. To the extent that consumers are attracted to alternative middleware platforms, alternative configurations of middleware, different media players, different instant messaging situations, they will have the freedom to do that, and they will be able to differentiate their products in that way.

More important, from a law-enforcement standpoint, however, Microsoft will not have the ability to retaliate against OEMs who want to make those choices. That is a very, very important part of our situation.

The operating system price will be uniform. The other types of inducements, the so-called "development arrangements," will have to be sort of on-list arrangements that are non-discriminatorily offered and done on very objective terms. The OEMs get a tremendous amount of freedom in this situation, and we hope they'll use that freedom to implement alternative software platforms, to the extent that they find those useful.

Q Is there a reason, though, that you didn't include the --

Q What happens if some of the states decide to challenge this? And how would that complicate things? And what -- are you prepared to -- is Justice prepared to side with Microsoft against the states, then?

MR. JAMES: The Department of Justice will side with the interest of consumers. That's our goal here. And I am hoping, and I am anticipating that there will be broad state support from the situation. My understanding of the circumstances is that they're taking time to study the agreement, and that people ought not read into these situations any divisions.

If the states decide to take a different position, the court has indicated that she will consider procedural options for how that takes place. And we will comply with all court orders, and we will defend our agreement and its content, as appropriate.

Q What's the impact on XP --

Q Will Microsoft have to change XP? Will they have to change the XP product they're shipping now?

MR. JAMES: I think that the substance of it is that they will have to change it over some period of time; that among other things, they will have to create in the system these defaults. I think there is a short period of time during which -- a matter of months in which they will have to change the product, the add/delete functionality for all the middleware, and the default settings, so that if you decide that you want -- or of the OEM decides that they want to install a competing middleware product, that will be easy enough to do.

I think those are the principal changes that they'll have to make. Later on, when we move into sort of background, I'll get some of my experts up here and they'll be able to talk to you in more detail about it.

STAFF: Let's take one last question, and then we'll do the background briefing.

Q Mr. James, you removed the breakup remedy from the table. But Microsoft had also said it feared the "bureau of Microsoft," this establishment of a technical committee.

Is that bureau of Microsoft or something else?

MR. JAMES: It's certainly not "bureau of Microsoft," it's an enforcement monitor. The way the technical committee works and -- is that they appoint someone, we appoint someone. That group appoints a third person. They work for us. They work for the Department of Justice. They report to the Department of Justice. They are obliged to tell us of offenses that they discover in the course of the -- in the course of monitoring their compliance.

They have a separate dispute resolution function, because this is a -- this is agreement that involves a tremendous amount of compulsory disclosure by Microsoft.

One of the things that I've seen in the press is that this is just requiring them to do something that they already do. The fact of the matter is that Microsoft has within its operating system a substantial number of non-public APIs and server protocols. Under this arrangement, those have to be disclosed. As people come in and begin to work with those protocols and applications interfaces, we're certain that people are going to have questions. Is this information documented fully enough? Should this other thing have to be documented?

These technical experts working for us on site, at the Microsoft facility, will be able to inquire from the source code, inquire from documents and other information that they have by virtue of access powers to documents and information within Microsoft, to determine whether disclosure has been met, to determine that these default mechanisms are properly set up and appropriately executable by companies. And to the extent that they're not, they tell us, and then we act like the Department of Justice.

STAFF: Thank you.

Q Who pays for the committee?

MR. JAMES: Pardon me?

Q Who pays for the compliance committee?

MR. JAMES: They pay for it under an agreement with us.

STAFF: Thank you.