Originally created 05/19/00

Government rejects Microsoft's proposed sanctions



WASHINGTON - The Justice Department ardently stood behind its proposed breakup of Microsoft, saying in a court filing Wednesday that the government's plan would "undo the harm to competition caused by Microsoft's illegal conduct."

In its reply to arguments outlined by Microsoft last week, the government reinforced its assertion that a breakup was the best way to prevent anticompetitive behavior by a company found to have acted in wide violation of federal antitrust laws.

The government also rejected milder sanctions suggested by Microsoft, saying the software giant merely "offered a cosmetic remedy that would have virtually no competitive significance."

Jim Cullinan, a Microsoft spokesman, said: "It's unfortunate but not surprising that the government is attempting to defend its extreme remedy proposal. We don't believe there's any kind of basis in law or in the case to warrant such a remedy."

A hearing on the case is scheduled before U.S. District Judge Thomas Penfield Jackson next Wednesday.

Under a plan submitted last month by the Justice Department and 17 of the states that successfully sued Microsoft on antitrust charges, Microsoft would be broken up into two companies. One would develop the company's dominant Windows computer operating system and the other, everything else, including Microsoft's Office software and its Internet services. The two companies would have to stay separate for at least 10 years.

In its formal response, the Redmond, Wash.-based company asked a federal judge to dismiss the government's proposal, saying such a severe punishment lacks a basis.

The company instead offered milder remedies that it promised to impose on itself. The remedies would curb the company's conduct against competitors and clients dealing with rivals.

But the government, in its reply Wednesday, said Microsoft's proposed remedies were "neither serious nor sensible," and would fail to restore competition in the high-tech industry.

Breaking up the company is the only sanction that "has a chance of ending "Microsoft's persistent unwillingness to abandon its widespread use of unlawful practices to maintain and extend its Windows monopoly," the Justice Department said in the brief filed late Wednesday.

Cullinan said the government's proposed conduct regulations would force Microsoft to give up its intellectual property to competitors like Sun and Oracle. "That's like forcing Coke to share its secret formula with Pepsi and every other major soft drink vendor in the country," he said. "The government wants to use a chainsaw to try and cure a common cold. We don't believe the Justice Department has the right cure for this alleged ailment."

Microsoft was found to have violated federal antitrust laws through predatory and anticompetitive behavior in an April 3 ruling by Jackson. Microsoft plans to appeal the ruling.

In its 71-page brief filed Wednesday, the government said Microsoft's response last week was "merely an attempt to delay the day when the law will hold it accountable for its illegal acts."

The government's latest filing essentially was to be the last official word before Jackson holds a hearing on the issue. The next round in the antitrust battle takes place in the judge's courtroom on May 24, when both the government and Microsoft will offer arguments in support of their proposals. Jackson is likely to set out a timetable for proceeding with the case at the hearing.