Justice Department still wants Microsoft split into two companies

Posted: Friday, May 26, 2000

WASHINGTON (AP) - The Justice Department, in a filing to a federal judge today, pushed anew today to have software giant Microsoft split into two companies.

The new document is the final version of the government's proposed remedy to curb the company's business practices, which U.S. District Judge Thomas Penfield Jackson found to be in wide violation of federal antitrust law.

Jackson ordered the government to submit the revision during a hearing on the issue Wednesday. Microsoft has the holiday weekend to work on a response.

In its new filing, the government contended that only after Jackson dismissed Microsoft's request for further hearings did the company submit a legal brief known as an ``offer of proof'' that defended its counter-proposal to the breakup plan.

After the Justice Department initially proposed splitting Microsoft in half, the company countered with a proposal that would avoid such a step. The company proposed instead to restrict its business practices for four years and, among other things, guarantee its partners and other software developers the same access to Windows technology as its own internal developers.

The Justice Department dismissed the proposal as inadequate.

Microsoft had said it would be willing to defend its case in court, and even said Chairman and co-founder Bill Gates and President and Chief Executive Officer Steve Ballmer would come to testify.

But in today's filing, Justice said that Microsoft's ``eleventh-hour submission of the Offer of Proof appears to be just a cynical ploy calculated to raise diversionary issues on appeal.''

On Wednesday, the notion of a three-way breakup surfaced, although it was not embraced by the Justice Department.

David Boies, the lead attorney on the case for the government, told the judge at the time that while a three-way plan was interesting, it would require more time and effort to split the company into three.

Boies said a two-way split would be quicker and easier to implement while still achieving the desired result of more innovation and freedom in the marketplace. And in its filing today, the government simply revised and resubmitted its initial proposal to split the company into two parts.

The new document makes minor changes to the one filed last month. It proposes to lengthen from 30 to 90 days the period of time before a final judgment would take effect.

It also would narrows the group of major stockholders who would be barred from holding stock in both companies. The original plan would have applied to those who own more than 3 percent of Microsoft stock; the revision proposes to raise that threshold to 5 percent.

The plan submitted today would keep every element of the government's original plan intact: Microsoft would be sliced into two companies; one would sell the dominant Windows operating system, while the other would sell everything else Microsoft produces, including its lucrative Office suite products and its Internet services.

On April 3, Jackson found Microsoft in violation of federal antitrust law. He said the company illegally used predatory tactics against competitors to maintain its monopoly in personal computer operating systems. The government's two-way breakup proposal was submitted as a remedy to the actions found illegal by Jackson.

Microsoft, which plans to appeal the ruling, insists its actions were not illegal and that the government has no basis for its proposal.



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