Federal Trade Commission to Announce Settlement With Microsoft

The settlement was aimed at resolving a complaint filed by privacy groups in July 2001 about the design and use of Passport, which promises consumers a single, convenient method for identifying themselves across different Web sites.

Privacy groups say Passport represents unfair and deceptive trade practices, alleging that Microsoft inadequately explained how it would track consumers' visits across its Web properties and make it difficult not to use the system or later to stop using it.

The FTC was expected to describe the terms of its settlement at a news conference later in the day.

A Microsoft spokesman declined to comment Thursday, but the company previously said the formal complaint by privacy groups was "replete with factual errors, misrepresentations and speculations that demonstrate fundamental misunderstandings of [Microsoft's products, services and technologies."

More than 200 million people have signed up for Passport accounts, which are difficult to avoid when using Microsoft's flagship Windows XP operating system. The software prompts consumers: "You need a Passport to use Windows XP Internet communications features (such as instant-messaging, voice chat and video), and to access Net-enabled features."

Passport is integral to Microsoft's most important upcoming technology services, including its .NET initiative. Using the service, consumers could entrust Microsoft or other organizations to centrally hold their personal information--such as credit card numbers or medical records--and make it available whenever needed.

Microsoft last year slightly reduced the amount of information consumers must provide to sign up for a Passport account.

In November, Microsoft acknowledged a serious flaw in the "e-wallet" feature of its Passport technology that could have allowed hackers to steal credit card numbers and personal information of about 2 million customers.

It temporarily shut down access by all consumers to their virtual wallets during several days for repairs to the network and testing. That move inconvenienced buyers at roughly 70 e-commerce Web sites that support Microsoft's wallet technology, called "Express Purchase."

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