Breakup a possible Microsoft remedy

With weeks, if not months, to go before a US federal judge rules on whether Microsoft used its monopoly status to violate antitrust law, legal scholars say the company faces severe repercussions, including the possibility of a court-ordered breakup.

It is not illegal to be a monopolist in the United States. However, it is against the law to use monopoly status in ways that harm consumers. And while US District Judge Thomas Penfield Jackson must still determine whether Microsoft is guilty of such misuse of its monopoly power, his harshly worded 207-page findings of fact leaves no doubt where he is headed, say many trial watchers.

"The government has been clear that they're not seeking money [from Microsoft]. They're not seeking a fine," said Dana Hayter, an attorney at Fenwick & West, in San Francisco, who once worked for the US Department of Justice. "A money penalty would be viewed by some as the cost of doing business."

The speculation that Microsoft may be broken up into different companies in order to break its monopoly struck fear in the hearts of some corporate users.

"I'm worried about what will happen on the service and support side if they break up the company," said one corporate IT manager, who requested anonymity. "We have a huge investment in the entire line of Microsoft products, and if I have to go to three or four or five different companies to get service and support, that's going to be a real burden on our company."

Although many legal observers see the breakup as the most intriguing potential outcome, others are pointing to the possibility of Windows going public.

"It would lessen the appeal of things like Office, because anyone could make an application that works well with Windows if they can play with the [Windows] code," said a corporate IT manager, a big Microsoft customer, who also requested anonymity. "This might be the thing that Microsoft dreads the most."

Sun Microsystems, Microsoft's arch rival, endorsed such a move, saying that "assuring that the technical interfaces of Microsoft's monopoly products are open" will foster competition.

Less aggressive, in terms of remedies, would be the imposition of price uniformity so that Microsoft would be forced to charge the same amount for licenses regardless of whether a vendor, for example, encouraged use of Microsoft's Internet Explorer browser. Such an imposition would ostensibly eliminate the sort of heavy-handed behavior Jackson found Microsoft engaged in when it came to licensing deals.

However, such a remedy on its own "has all of the important criteria that make it unattractive," said Herbert Hovenkamp, a University of Iowa law professor.

"It doesn't break up the monopoly," Hovenkamp said. Rather, it would "basically be imposing restrictions on how the monopoly is used."

Hovenkamp said that's what happened with the failed 1995 consent decree to which Microsoft agreed, after the government went after the software maker. Microsoft was able to sidestep the consent decree because the legal language used was not strong enough, Hovenkamp and other critics asserted.

Jackson must be careful when wading through the minefield of remedies, one analyst said, because if his proposals are too harsh they could be thrown out when Microsoft appeals the case, which the company almost certainly will do.

"There could be some long-term regulation, some sort of direct dictate with oversight, but there are things he absolutely can't do," said Rob Enderle, a senior vice president at Giga Information Group. "There's not enough here to break up the company - as much as he'd like to do that."

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