DOJ Sticks to Two-Way Microsoft Break-Up Plan

BOSTON (05/26/2000) - Despite prodding from a federal judge to stiffen its proposal to break up Microsoft Corp., the U.S. Department of Justice is sticking with its original recommendation to split the company in two.

In a court filing late last week ordered by presiding Judge Thomas Penfield Jackson, the Justice Department said breaking Microsoft into two parts will bring innovation and freedom back to the marketplace.

The document is the final version of the government's proposed remedies to punish Microsoft for violating federal antitrust laws.

Last Wednesday during oral arguments, Jackson hinted that breaking the company into three parts - one for applications, one for operating systems and an additional one for Internet Explorer - was better than creating two monopolies that would remain "dominant and eminently profitable."

But government attorneys said a three-way breakup of Microsoft would require more time and effort than their original plan while returning the same results.

In its filing, the Justice Department criticized Microsoft for its 11th-hour filing of a document explaining how it planned to prove its case and put Chairman Bill Gates and CEO Steve Ballmer on the witness stand. Neither has faced direct questioning in the case.

The government criticized Microsoft for what it said was "a cynical ploy calculated to raise diversionary issues on appeal."

Jackson last week suggested the government's initial penalty proposal - splitting Microsoft into two separate companies - did not go far enough.

During oral arguments on Wednesday, Jackson hinted at the three-way split and gave the Justice Department two days to file its final proposal. Jackson made reference to a friend of the court brief - which he called "excellent" - that recommended a three-way split.

"The government is foolish not to follow Jackson's lead and at least suggest a three-way breakup," says Hillard Sterling, senior litigator for Gordon & Glickson P.C. in Chicago.

"The judge is clearly indicating what he wants. He was looking for added justification for the relief he is envisioning."

Jackson's decision now could come as early as next week. The prospect of that happening led Microsoft to postpone the planned launch of its new platform strategy called Next Generation Windows Services.

The feisty Jackson has been full of surprises. For instance, he shocked the company last week when he refused to give Microsoft additional time to prepare its defense against a breakup.

After Microsoft attorney John Warden opened Wednesday's oral arguments by asking the judge to prepare a schedule for the remainder of the trial, Jackson shot back, "I'm not contemplating any further processes."

Microsoft had been hoping to get up to a six-month extension.