UPDATE: Microsoft: Small Changes for Bad Behavior

SAN FRANCISCO (05/11/2000) - What a shock! Microsoft Corp. has a different idea of justice than the United States government has.

Answering the Justice Department's recommendation that Microsoft be split in two, the software giant has proposed significantly different remedies for its violation of antitrust laws.

Microsoft's legal filings include several proposals, with alternatives that vary with the court's response. To start, the company filed a motion for a summary judgment, asking the judge to dismiss the government's proposal out of hand as "an unprecedented remedy for the Sherman Act," according to Bill Neukom, Microsoft's vice president for law and corporate affairs.

Microsoft has steadfastly opposed a breakup.

"There's never been a company that's grown through its own efforts that's been broken up in this country," declares Steve Ballmer, Microsoft president and chief operating officer. "It would be a little like breaking up Michael Jordan and Scottie Pippen because they won some titles, or breaking up John Lennon and Paul McCartney because they had too many number-one hits. I don't think consumers would be very well served at all by that kind of action."

If the court drops the possibility of a breakup, Microsoft says it would accept restrictions on its behavior immediately. These would include disclosing application programming interfaces (APIs), changing the way it deals with business partners, and offering a version of Windows without the Internet Explorer browser.

Microsoft still denies it broke any antitrust laws. It accepted the premise of violating the Sherman Antitrust Act for the sake of argument, and offered its own proposed remedy under this reasoning. But even if the court accepts Microsoft's remedies, Microsoft won't.

"We'd consider appealing," Neukom says.

In a separate filing, Microsoft reiterated its objections to the government's suggestion that the company release its code and let systems vendors change Windows.

"Draconian measures like dividing Microsoft and forcing us to disclose valuable information on our software to our competitors exceeds reasonable relief," Neukom says.

Microsoft says the government's proposed regulations would hurt the value of Windows for consumers and developers.

The government wants to let vendors modify Windows drastically while still using the Windows trademark, Neukom says. "It's the Balkanization of Windows," he adds.

In its proposed remedy, Microsoft offers to be more open and lenient in licensing Windows. The company will let system vendors promote non-Microsoft products and remove the Internet Explorer icon to offer another browser as the default.

Also, Microsoft would agree to not cancel or refuse licenses to system vendors that also use competing platform software such as Linux. Nor would it restrict its partners from releasing applications on competing platforms, such as requiring those releases to come later than the Windows version. It would not restrict system vendors who want to put icons for third-party products on the Microsoft desktop.

But Microsoft's proposed remedies offer significantly less than the DOJ has asked in terms of releasing the inner workings of Windows.

Microsoft says it will give technical information to Windows application developers in a timely fashion. But Microsoft claims it has always offered technical information in a timely fashion.

"It's consistent with what we've done," Neukom says. "The proof (that Microsoft has never withheld technical information) is in the pudding. There are so many tools running on Windows because we do provide the information they need."

Microsoft also proposes lengthening the remedy phase of the trial. The company offered three time lines that postpone oral arguments, which are now scheduled for May 24. If the court decides to consider the DOJ's breakup proposal, Microsoft would like oral arguments delayed until December 4.

Microsoft offers to pay the plaintiffs' attorneys fees -- no small sum -- and suggests the remedies be in effect for four years. The government can check on Microsoft's compliance and look at documents during normal business hours only, the company suggests -- a variation on the DOJ's proposal to monitor the company's compliance.

The DOJ had proposed Microsoft be broken up for at least ten years, and the other remedies would be in effect for three years.

Microsoft says it would comply within 45 days, and when it ships a new version of Windows, it will support and ship the predecessor edition for three years.

On April 28, the Justice Department and 17 states proposed Microsoft be split into two companies: a Windows operating system company and an applications company centered on Microsoft Office. They also say Microsoft must not force bundling or cut deals with vendors that restrict competing software. Microsoft must offer uniform terms for licensing Windows to vendors and allow those vendors to change the splash screen. Also, Microsoft must not knowingly implement any OS technology that interferes with competing applications.

Presiding Judge Thomas Penfield Jackson has ruled in findings of fact that Microsoft is a monopoly that illegally used its power to squash competition, which harmed consumers.

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