Microsoft Rejects Breakup Proposal

Microsoft Corp. offered up a short list of conduct restrictions in its proposed final judgement submitted to District Court Judge Thomas Penfield Jackson today.

Microsoft Corp. offered up a short list of conduct restrictions in its proposed final judgement submitted to District Court Judge Thomas Penfield Jackson today.

The company also asked Jackson to reject a government plan to divide the software giant in two, proposing restrictions on its business practices instead.

Microsoft filed four documents in addition to the proposed final judgement, including a motion for summary rejection of the governments breakup proposal and a memorandum in support of its proposal.

In the latter, Microsoft said: "The government has never contended that Microsoft unlawfully acquired monopoly power, but rather that Microsoft maintained its supposed monopoly unlawfully. Yet, the Court did not find that. ... In the absence of such a finding, the governments requests for relief purportedly designed to "restore competition in the market" are unwarranted. ...

"Unlike the governments requested relief, which seeks to re-engineer the entire software industry and impose extremely burdensome restraints on Microsoft that are wholly unrelated to the case that was tried, Microsofts proposed final judgment fully redresses the antitrust violations found in this case. Microsoft therefore respectfully requests that the Court enter its proposed final judgment."

So ends Microsofts defense of its proposal, a document lengthier than the proposal itself.

The lengthiest document of all -- the memorandum in support of a summary rejection of a breakup -- attacks not only the governments proposal as "radical" but also the court for expediting the trial.

Microsoft also filed a document regarding the "future proceeding on the issue of remedy." The company says it is entitled to a hearing before any remedies are imposed and suggests three possible scenarios.

If the court follows the governments proposal to the letter, Microsoft requests a discovery process lasting until a Dec. 4, 2000, evidentiary hearing. If the court rejects the breakup proposal, but accepts the governments myriad conduct restrictions on Microsoft, then the software maker wants a hearing on October 2. Finally, if Judge Jackson rejects both the DOJ and Microsoft proposals, then Microsoft proposes a hearing be scheduled for August 7.

Microsoft suggests that the court use its final judgement proposal, if necessary, as interim relief during the discovery process.

The remedies

Microsofts list of remedies is briefer than the governments proposal, filed two weeks ago by the Department of Justice and 17 states, that called for a breakup.

The proposal is notable more for what it doesnt mention -- Java, middleware, OEM Windows pricing -- that for what it does.

In the document, the software giant says it would allow computer makers to remove the Internet Explorer icon and set another browser as the default as well as prominently display applications from Microsoft competitors on the Windows desktop.

Microsoft would agree to all that as long as the company is not prohibited from continuing to build Web browsing capabilities directly in to its operating systems.

The company said it would be prohibited from "terminating the License Agreement of any of the 20 largest OEMs (as measured by annual volume of Windows Operating Systems that they ship) without having first given the OEM written notice of the reason for the proposed termination and not less than 30 days opportunity to cure."

But the proposal does not discuss inequities in the companys Windows pricing policy for OEMs, which was discussed during the trial in closed-door sessions between Judge Jackson and the lawyers representing Microsoft and the government.

The proposal does say Microsoft would be required to offer predecessor versions of operating systems to OEMs for the same price as the current version of the OS for up to three years.

The ticklish API issue

Microsoft said it will make APIs more uniformly available to software developers, although it isnt offering to make public all of its APIs. The company would make more widely available the APIs needed for application compatibility. No mention was made of the Windows kernel APIs.

All of the conduct restrictions would apply for a period of four years, according to the proposal, and Microsoft says it would submit to compliance monitoring by the DOJ.

The Redmond, Wash., company held a press conference this afternoon to discuss the proposal.

The next deadline in the ongoing antitrust case is May 17, when the government is set to reply to Microsofts proposal.

Appeal, appeal

Microsoft insists it followed the law and promised to vigorously appeal Judge Jacksons findings.

The company said the trial had failed to find that there would be greater competition for operating systems in the absence of Microsofts conduct.

"The governments adventurous request to split Microsoft into two companies should be rejected as a matter of law," Microsoft submitted to the judge.

Microsoft also said it would pay "the plaintiff states reasonable costs and attorneys fees." No mention is made of the DOJs costs.

Iowa AG: Remedies are inadequate

In a statement released Wednesday afternoon, Iowa Attorney General Tom Miller said the remedies proposed "are inadequate. These measures would not have prevented the serious violations of law found by Judge Jackson, and they are not adequate remedies to assure that the law is not broken in the future.

"The States also believe this case should continue to move steadily ahead to a conclusion and not be derailed or dragged out by Microsoft. ... We stand by our proposed remedies, which call for both restrictions on Microsofts anti-competitive conduct and a reorganization of the company."

The Department of Justice released a statement that read in part:

"Microsofts proposal is ineffective and filled with loopholes. It would not have prevented Microsoft from engaging in many of the illegal acts found by the District Court, nor would it prevent the company from using its monopoly power in the future to engage in the same kind of illegal behavior to crush new innovations. ...

"The proposal fundamentally fails to repair the damage to competition cased by Microsofts illegal acts, or prevent Microsoft from committing similar violations in the future."