The deal would require Microsoft to give independent monitors full access to its books and plans for five years to ensure compliance and to provide information to help rivals make products compatible with its dominant Windows operating software.
The software giant would also be prohibited from entering exclusivity deals with computer sellers that disadvantaged competitors.
Attorney General John Ashcroft and Microsoft founder Bill Gates both hailed the settlement, saying it would help the sagging economy.
“This settlement is the right result for consumers and businesses, the right result for government and the right result for the economy,” said Ashcroft at a morning press briefing.
Microsoft stock soared Thursday on word of the deal. At midmorning Friday, Microsoft slipped 25 cents to $61.59.
Microsoft Chairman Gates said the settlement goes further than we might have wanted, but it’s “the right thing to do.”
“The settlement will help strengthen our economy during this difficult time and ensure that our industry can continue delivering innovations to the marketplace,” he said.
U.S. District Judge Colleen Kollar-Kotelly is reviewing the settlement and gave states involved in the case until Tuesday to accept or reject the plan. Kollar-Kotelly had asked all parties to expedite negotiations due to the economic uncertainty caused by the Sept. 11 terrorist attacks.
Microsoft lawyer John Warden urged the states to accept the plan, saying the agreement is “good for the parties, and for consumers as we fully expect the states will conclude.”
Approval of the deal would take three months to allow review and final court approval. There would be 60 days for the public to weigh in with comments.
Brendan Sullivan, a lawyer representing the 18 states that joined the antitrust suit against Microsoft in 1998, said his clients needed until Tuesday to review the terms and “be sure that this is a good agreement that is enforceable.”
One of the lead attorney generals in the case, Tom Miller of Iowa, said the settlement “represents some progress.”
A staunch Microsoft critic, Connecticut Attorney General Richard Blumenthal, said “the world changed on Sept. 11” and there was now “a powerful dynamic to resolving the issues in this case.’
Other details of the proposed settlement include a five-year implementation period, which could be extended for another two years if Microsoft failed to follow the terms. Microsoft would allow a panel of three independent experts to reside on its premises and work full-time to ensure the software giant complied with the settlement, Justice officials said.
“These experts will have full access to all of Microsoft’s books, records, systems and personnel, including source code, and will help resolve disputes about Microsoft’s compliance,” the department said.
The deal, if approved, would bring to end the historic legal battle in which the Clinton administration first sought to break Microsoft into two companies to punish the company for antitrust violations. The Bush administration took the breakup off the table before starting negotiations this fall.
Critics charge that the deal does little to prevent Microsoft from engaging in the same practices that led to the monopoly charges.
Some states also argued Microsoft cannot be trusted to reform its business practices. Iowa, Connecticut, Wisconsin and California were among the most resistant to any immediate settlement, along with Ohio and Kansas.
If states reject the settlement, they could use upcoming public hearings to undercut the deal or could pursue the case separately in court.
But legal experts cautioned it was unclear how effectively states could influence terms under consideration by the trial judge, since Kollar-Kotelly has expressed such strong desire for a settlement.
The states have until Tuesday to decide whether they will join the proposed settlement.