Microsoft To Counter Breakup Proposal

Microsoft Corporation is expected to propose restrictions on its own business practices when it responds Wednesday to the U.S. federal court antitrust ruling against the company and a proposal that the company be split into two firms.

In its response, Microsoft will request extensive hearings to examine the government’s proposal, which was followed late last month by an allegation that the company also engaged in illegal business tactics against companies including Palm Inc., the manufacturer of personal digital assistants (PDA).

As evidence of intent, the government cited a July 11, 1999 memo from Microsoft Chairman Bill Gates urging his company to find a way to “tie” the operating system to its own PDA. The court found that Microsoft had violated antitrust laws and abused its monopoly powers by using its Windows operating system to quash competition and limit consumers’ options.

The court also found that Microsoft had monopolized the Internet browser market to the detriment of its chief competitor, Netscape Communications.

Microsoft spokesman Mark Murray said his company has been instructed to provide a proposal that offers a “reasonable and appropriate remedy for the violations the court found, recognizing that Microsoft disagrees with many of the court’s findings and plans to appeal.”

Terms of Microsoft’s Response

A report published in Sunday’s Washington Post indicates that Microsoft’s proposal to the court will include the following items:

• That the company will provide software developers the information they need to build their products in a timely way,
• That computer makers be permitted to alter the computer desktop, a move that would allow competitors such as IBM or Compaq to feature their own software products,
• That computer makers be permitted to conceal access to Microsoft’s Internet Explorer browser,
• That Microsoft be unable to draft agreements that effectively coerce other companies to promote its products over other products.

The proposal is expected to address key elements of the government’s concerns, including Microsoft’s alleged practice of selectively providing its application code to other developers and Microsoft’s method of tying its browser to the operating system.

The idea of hiding the browser is evidently a follow-up to Microsoft’s contention that the operating system and the browser are fully integrated and cannot be separated.

Softer Stance

Many industry observers have noted that Microsoft is not going quite as far in its proposal as it did in out-of-court settlement negotiations prior to the ruling.

It is likely that the company did not feel compelled to use some of the ideas that it would have used in a settlement discussion, because the court did not find Microsoft’s deals with various Internet companies and computers makers in violation of the Sherman Antitrust Act. Those deals, the court determined, did not prohibit rival Netscape from establishing its own agreements with the same companies.

Gates Stands Firm

Meanwhile, Gates staunchly defends his company’s practices in the forthcoming issue of Time Magazine, citing the “symbiotic nature of software development” that may “not be obvious outside the industry.”

According to Gates, “The effect of this lawsuit will be to punish Microsoft no matter what harm this does to consumers, software developers, the industry that has driven America’s remarkable growth, or, indeed the entire economy.”