UPDATE: Judge Orders Microsoft Breakup

BOSTON (06/07/2000) - U.S. District Court Judge Thomas Penfield Jackson today ordered the breakup of Microsoft Corp. into two separate companies, separating the operating system business from applications, essentially granting everything the government plaintiffs asked for.

Microsoft has four months to submit a plan for "divestiture," as the breakup is being called. The government then has 60 days to submit objections to that plan, after which Microsoft has a month to respond to the objections.

The divestiture will be "stayed," or put on hold, until the appeals process is complete, but Judge Jackson has ordered a variety of behavioral remedies aimed at stopping Microsoft's business practices that he has deemed illegal under the Sherman Antitrust Act. Jackson previously ruled that Microsoft has a monopoly in the operating systems market and that it has illegally used that status in an attempt to dominate other markets, most notably Internet browser software, as well as to squelch competition.

The U.S. Department of Justice (DOJ) and 17 of 19 state attorneys general that filed suit against Microsoft called for the breakup. The lawsuit is viewed by legal experts as historic and is likely to establish antitrust case law for decades to come.

"Plaintiffs won the case, and for that reason alone have some entitlement to a remedy of their choice," Jackson said today in his "memorandum and order."

Besides that court filing, he also issued his "final judgment," a 13-page document that establishes the particulars of the remedies, including the breakup.

As part of the breakup plan, the judge ordered that the operating systems business may not "develop, license, or distribute, modified or derivative versions of the Internet browser."

Jackson further chided Microsoft officials for their ongoing public contention that the company has not behaved improperly.

"Microsoft officials have recently been quoted publicly to the effect that the company has 'done nothing wrong' and that it will be vindicated on appeal," he wrote. "The Court is well aware that there is a substantial body of public opinion, and some of it rational, that holds to a similar view. It is time to put that assertion to the test. If true, then an appellate tribunal should be given early opportunity to confirm it as promptly as possible, and to abort any remedial measures before they have become irreversible as a practical matter."

While the antitrust case has gone on for nearly two years, Microsoft has continued its past business practices "and may yet do to other markets what it has already done in the PC operating system and browser markets," Jackson said.

"Microsoft has shown no disposition to voluntarily alter its business protocol in any significant respect. Indeed, it has announced its intention to appeal even the imposition of the modest conduct remedies it has itself proposed as an alternative to the non-structural remedies sought by the plaintiffs."

Moreover, he wrote, "Microsoft has proved untrustworthy in the past," continuing its anticompetitive practices even while under a preliminary injunction aimed at stopping such behavior.

In a public statement, Microsoft Chairman and Chief Software Architect Bill Gates said, "We will be appealing this decision, and we believe we have a very strong case on appeal. We believe this ruling is inconsistent with the past decisions by the Appeals Court, with fundamental fairness, and with the reality of the marketplace. Consumers every day see more competition, lower prices and an economy full of innovation."

Additional details to follow.

Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or http://www.microsoft.com/ The DOJ, in Washington, D.C., can be reached on the Internet at http://www.usdoj.gov/.

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