DOJ, States Slam Microsoft Proposal

In a blistering 73-page response filed Wednesday, the U.S. Department of Justice (DOJ) and 19 states staunchly rejected Microsoft Corporation’s proposal for self-imposed remedies to keep its company intact.

The government told the court that Microsoft’s suggested remedies would do nothing to prevent a recurrence of the illegal behavior that led U.S. District Judge Thomas Penfield Jackson to rule on April 3rd that the company had violated the Sherman Antitrust Act.

Calling the proposal “neither serious nor sensible,” the government brief asks, “What remedy does Microsoft propose to undo the damage to competition caused by its past illegal conduct?” It also supplies an answer: “Nothing.”

“Microsoft attempts to elude the need for structural relief by pretending, contrary to the evidence at trial and this court’s findings, that its conduct had no effect on competition,” the brief states.

Microsoft Fires Back

Microsoft wasted no time in firing off a terse response. “It’s unfortunate but not surprising that the government is trying to defend its extreme remedy proposal,” said Microsoft spokesman Jim Cullinan. “We don’t believe there’s any basis in this case for these kinds of excessive actions, which we believe would hurt consumers, the high tech industry and essentially the overall economy.”

After the court’s April 3rd ruling, government lawyers proposed breaking Microsoft into two companies: One that would sell applications software, and another that would sell operating systems.

The proposal filed by Microsoft last week calls for Judge Jackson to dismiss the government’s breakup proposal and allow the company to remain intact with strict restrictions on its business practices.

The restrictions include offering a version of Windows 98 with Internet Explorer hidden, and an agreement to refrain from contracts compelling Internet providers and computer manufacturers to favor Microsoft products.

Stalling Ploy

The government said that Microsoft’s remedy would leave the company free to engage in the very conduct the court found unlawful in its ruling: retaliating against manufacturers who distribute non-Microsoft products or refuse to distribute Microsoft products; making predatory expenditures, simply to eliminate competition; and binding together two products without any technological justification.

The government accused Microsoft of stalling, labeling the company’s remedy suggestions as “a transparent effort to delay the determination and implementation of a remedy for its illegal acts as long as possible.” Microsoft’s request for several months to prepare its case, the government said, is “unwarranted and unreasonable.”

Judge Jackson has indicated his desire to fast track implementation of remedies, preferably in fewer than 60 days. Although a remedy hearing is scheduled for May 24th, most industry observers expect the case to take up to two years on appeal. The government is expected to request that temporary restrictions be placed on the company during the time it takes to go through the appeals process.

Pro MS Group Appeals to Judge

Meanwhile, earlier this week, the Association for Competitive Technology (ACT) filed a proposal asking Judge Jackson to reject the government’s efforts to break Microsoft up.

The lobbying group said splitting Microsoft into an operating system company and a software applications company would harm both consumers and other software developers “as much or more than Microsoft.” The group also asked the judge to hear testimony from software developers before passing final judgment.

“So far, this case has been a battle between the titans,” ACT president Jonathan Zuck said. “It’s high time that all get a sense of the impact the government’s extreme proposal would have on those getting caught in the crossfire — the tech entrepreneurs.”

Intellectual Property Rights

Microsoft’s Cullinan underscored ACT’s contention, saying that the government wants to force Microsoft to share intellectual property with its chief competitors.

“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.”

Recent polls indicate that the public opposes splitting the company.