Microsoft offers plan for remedy

Rejecting breakup, company proposes limited restraints

Hanging like a `sword'

Justice Department sees no redress for antitrust actions

May 11, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- Microsoft Corp., fiercely criticizing a proposal to break it up as a corporate death knell, urged a federal judge yesterday to impose only narrow new curbs on the software giant's business dealings.

The antitrust remedy -- dividing the company in two -- suggested by the Justice Deparment and 17 states including Maryland "threatens Microsoft's very corporate existence," it argued in a new filing in the 2-year-old case.

"The government," Microsoft said, "has invited the court to destroy or hobble an American company that is a model of success in the high-technology arena and to do so explicitly to reshape the single most productive and envied industry in the United States."

Insisting that it has not violated any antitrust law, Microsoft said it was willing to have U.S. District Judge Thomas Penfield Jackson promptly issue a limited remedy to cure the violations that he has found. None of his findings of violations, it said, justify such a "radical, drastic and adventurous" plan to "rip apart" the company.

But, Microsoft was quick to add, even if the judge did issue a narrow order requiring it to compete more fairly with competitors, he should do so only on condition that Microsoft could challenge that ruling in an appeal.

Steve Ballmer, the company's president, told reporters that the alternatives Microsoft is suggesting are "reasonable and appropriate," in contrast to the government proposal "that would literally set back the high-technology industry and the American consumer years and years and years."

The Justice Department denounced Microsoft's alternative plan as "ineffective and filled with loopholes."

"The proposal fundamentally fails to repair the damage to competition caused by Microsoft's illegal acts, or to prevent Microsoft from committing similar violations in the future," the department said. Its formal response and that of the states is due in court Wednesday.

Microsoft claimed it was making a concession by accepting the possibility that restrictions of any kind should be considered on the way it deals with competitors and suppliers.

But it was not willing to have those restraints last long. Any new limitations on its business operations, the company argued, should remain in effect only for four years -- not the 10 years that the Justice Department and the states have recommended in their suggested curbs on the company's future business behavior.

Rejection urged

The company urged Jackson to throw out the most threatening elements put forth by its challengers: that the company be split, and that it be forced to share its secret software codes with competitors.

In the remedies they suggested last month, Justice and the states urged the judge to create two companies out of Microsoft. One would market and otherwise control the Windows operating system, or the brains that command personal computers. The other would control everything else Microsoft has, including Web browsers and office efficiency programs, such as word processing and accounting software.

That proposal, the company said yesterday, should not be left hanging like a "sword" over Microsoft. The threat, the company said, could cause many valuable employees to leave for other jobs, and lead other high-tech companies to shy away from dealing with Microsoft until they know whether it will survive.

Taking `crown jewels'

Moreover, the challengers' secrets-sharing proposal, the company added, "would constitute a wholesale confiscation of ... the company's crown jewels" -- that is, the storehouse of inventions and creative ideas that have made it the dominant company in the digital world.

If the judge is not willing to strike those proposals right now, Microsoft contended, the judge should stretch out -- for many more months -- his schedule for issuing a final ruling on antitrust remedies.

Jackson has said he hoped to reach a final decision by June or shortly thereafter. A hearing is scheduled May 24 to discuss remedies.

More time needed

Microsoft said that, if it is forced to try to fend off a breakup plan and a secrets-sharing plan, it would need at least until August and maybe even December to get ready for a remedies hearing.

It would need the additional time, the company said, to gather information to demonstrate what "radical surgery" of that magnitude would do to Microsoft and to the software industry in general.

Microsoft made clear that, at the May 24 hearing, it would try to force immediate action by the judge to reject a breakup of the company and the sharing of its secrets. Microsoft also will try to make a case for an extended information-gathering scenario.

If Jackson does lengthen his timetable for final action, the case could drag on in his court through much, if not all, of the rest of this year, and perhaps into next year. Any appeals could add months to the process -- keeping the outcome of the antitrust case in legal limbo.

Appeasing judge

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