Microsoft's proposed remedy in its antitrust case, along with its warning that a breakup would bring severe consequences to the economy, is being scoffed at by the government and other opponents of the software company's actions.
"I think Microsoft is in denial: It continues to deny doing anything wrong and is offering nothing new," said Connecticut Attorney General Richard Blumenthal yesterday, one of the principal state attorneys in the lawsuit filed by 19 states and the US Department of Justice.
Blumenthal said the proposed remedies "seem inadequate to repair the damage done by Microsoft's illegal use of its monopoly power and to stop future misconduct."
In court papers filed late Wednesday, Microsoft warned of "massive disruption" to its operations, including the possibility of employees leaving in droves, if the government's breakup plan is enacted.
The company asked for an immediate dismissal of the government's plan and filed an alternative set of remedies that would impose restrictions on the company's dealings with PC makers, along with ensuring that third parties have timely access to technical information needed to develop software for the Windows operating system.
"Not only is the breakup an unprecedented remedy in the 110-year history of the Sherman Act, it is also an entirely unwarranted remedy," said Bill Neukom, Microsoft's executive vice president for law and corporate affairs. "Breaking up this company would be a punitive proposal that would fundamentally harm consumers, the industry and the American economy."
But Blumenthal said the Microsoft plan is "laden with loopholes and is really an invitation to constant and continuing government policing and intrusion."
Blumenthal also said Microsoft is "greatly exaggerating the potential dangers (of the breakup), raising a spectre that simply is unrealistic. The reorganisation proposed by the government would provide incentives for present employees to be more creative and innovate and unleash competition in a way that tremendously benefits the economy as a whole."
Microsoft also asked the court for more time to consider the remedy phase, possibly extending it until December.
"If they need additional time, it should be measured in weeks, not months," said Blumenthal. "Unnecessary delay benefits no one. It means continued and increasing uncertainty, which is everyone's enemy."
The government will submit a response to Microsoft's proposal May 17. Both sides are due in court May 24 to argue the remedies, but Blumenthal said it's possible a scheduling conference may be held between then and now to work out details of the hearing timetable.
Microsoft isn't the first company involved in an antitrust case to make such a warning of economic consequences as a result of a breakup, said William Kovacic, a law professor at George Washington University in Washington. Two other companies broken up by the government made similar predictions.
"Standard Oil told the Supreme Court that a breakup up would have calamitous effects throughout the economy in 1911," said Kovacic. AT&T "said that the US would pay a terrible penalty in reduced innovation and poor telephone service."
"In both those historical examples, the catastrophes didn't take place. If you look at this history, there might be a tendency to say we heard this before," said Kovacic.
The judge, US District Court Judge Thomas Penfield Jackson, will likely agree to some extended schedule, said Kovacic. "If you are a single federal judge and you're being asked to dismember what may be the world's most significant commercial enterprise, are you willing to invest in a couple of months of additional discussion and analysis to make sure you get it right? In the great sweep of time, that doesn't strike me as being excessive."
Rich Gray, an antitrust attorney at Outside General Counsel Silicon Valley in Menlo Park, California, said the Microsoft briefs may help the company fight a breakup plan on appeal, should the judge impose it.
One argument is based on the judge's own findings that the government hadn't shown that any of the illegal acts actually stopped Netscape Communications or Sun Microsystems from being able to compete with Windows, said Gray.
"Overall, I think Microsoft has made a very strong argument against a breakup, stronger than I expected. I'm not sure that it will convince Judge Jackson, but I think it will play very well at the appellate level," said Gray.
Microsoft proposed a number of self-restrictions in its brief yesterday, including the following:
PC makers would be allowed to delete the Internet Explorer icon from the Windows desktop and start menu, offer their own Internet sign-up process in the initial Windows boot sequence and display icons for non-Microsoft-platform software on the Windows desktop.
Microsoft would be prohibited from entering into contracts to promote any product or service through Windows in exchange for the other party agreeing to limit distribution of non-Microsoft platform software.
The company would ensure timely and complete access of application programming interfaces to developers.
The company would pay the attorneys' fees and other costs of the 19 plaintiffs in the lawsuit.
But Ken Wasch, president of the Software and Information Industry Association (SIIA) in Washington, said the proposals don't change Microsoft's current business practices.
"What Microsoft is still focusing on is they think this case is still solved by excising certain provisions in their contracts. That's not what this case is about. This is about restoring the possibility of competition in the operating system (market). We're pretty underwhelmed by what we see." The SIIA filed a brief in support of the government in the Microsoft case and has argued for a breakup.
Jackson ruled last month that Microsoft broke antitrust laws by engaging in anticompetitive and predatory conduct to maintain its monopoly. Following that ruling, the government filed court papers seeking to split the company in two, dividing its applications from the operating systems. The brief filed yesterday was Microsoft's response to that plan.