Prosecutors aim to break Microsoft monopoly

Ideas range from cutting company up to publishing secrets of Windows


WASHINGTON -- The state and federal officials prosecuting the Microsoft antitrust case say their goal in any settlement, or court-imposed remedy, will be to break Microsoft's monopoly in personal computer operating systems or limit the power to wield it.

The Justice Department officials and state attorneys general have not decided how that should be done.

Proposals include forcing Microsoft to publish the proprietary code for Windows so that other companies could design competing systems and breaking up Microsoft.

The trial judge, Thomas Penfield Jackson, would be the one to approve a settlement or select a remedy, after receiving recommendations from the plaintiffs.

In the 18 months since the Justice Department and the states filed suit against Microsoft, much of the discussion about the case has involved Web browsers and Microsoft's decision to build one into Windows.

But Jackson made explicit what had been implicit before: The case is really about the operating-system monopoly and Microsoft's use of its monopoly power to promote other products.

"The case showed that Microsoft's abuse of its power in the operating-system market is endemic to its conduct, and any remedy has to deal with that," said Richard Blumenthal, attorney general of Connecticut.

Pre-eminent among the judge's findings was Microsoft's abuse of its monopoly power, a finding that swept some of the softer remedies -- such as forcing it to revise contract agreements with other companies -- out of consideration.

Bill Lockyer, the attorney general of California, said that "the rigorous analysis" of possible remedies "is now just beginning in a very serious way, by academics and experts, and we will all want to review what they have to say before we go forward."

One academic advising the states, Herbert Hovenkamp, a professor at the University of Iowa College of Law, said: "In my opinion, if the findings show significant abuse of monopoly power, then the appropriate remedy is to break up the monopoly -- not to hobble the company or try to regulate it."

He noted that "breaking up" a company is not such an extreme concept for the federal government. Quite often recently, the government has required companies to spin off divisions to win approval for a merger or acquisition of another company. But splitting up Microsoft is hardly the only proposal under discussion.

Lockyer said he believes it is possible to compel Microsoft to live within the law with its current structure, although he says he worries about the effectiveness of agreements limited to changing its conduct, such as Microsoft's 1995 consent decree with the Justice Department to end an earlier antitrust investigation.

"It may be that we could devise conduct guarantees that are more enforceable than in the past," he said.

Some other attorneys general disagree, saying such guarantees would not be effective.

But among the conduct guarantees still under discussion at state and federal levels are proposals that would force Microsoft to charge every computer manufacturer the same price for Windows, so the company could not impose higher prices to punish competitors or those who do business with them.

Such a proposal would also have to include clear guidelines on what Microsoft products and services it could build into Windows, government officials say.

The government officials say four additional remedies are under discussion, though each of them could be applied in a variety of ways and might be combined with elements of others. Not surprisingly, Microsoft says it opposes all of them.

One idea would be to force Microsoft to publish the secret, proprietary source code that makes up the Windows operating system. The goal would be to allow other developers to design competing operating systems that are compatible with Windows and the many thousands of software titles that are written for it.

Another idea long favored by the states would be to force Microsoft to auction the source code to Windows so that two or three other companies could begin selling competing operating systems.

In that case, Hovenkamp noted, the newly competing companies would have to set up a "joint venture for compatibility standards" so that computers and software would work equally well with each of the systems.

In addition, the officials are discussing two proposals for breaking up the company. One would divide the company into several equal parts; each new company would hold all of the software code and intellectual property from all of Microsoft's products.

But after the breakup, each of the new companies would immediately begin competing with the others.

A final alternative is that of breaking Microsoft into three different companies. One would control the operating system; one the applications programs, such as Word and Excel; and the third would control the Internet and related businesses.

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