Microsoft Execs Stand Their Ground In Antitrust Case

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May 10, 2000 (4:54 PM EDT)

Microsoft Execs Stand Their Ground In Antitrust Case

By Mary Mosquera,

WASHINGTON, D.C. -- Microsoft said Wednesday that a company breakup would be the most significant remedy in the 113-year history of U.S. antitrust law.

Microsoft chairman and chief software architect Bill Gates said many elements of the government's suggested regulations are unwarranted, even without the extreme breakup proposed.

"The government's proposals would take away Microsoft's property by forcing us to disclose the source for our products, even though Microsoft spent hundreds of millions of dollars to develop these products," Gates said. "The government also seeks to interfere with the design of Microsoft's products."

"The government's so-called conduct and disclosure remedies are just as damaging to the company and just as bad for consumers as their breakup demand," said Microsoft president and CEO Steve Ballmer. "The government's proposals really represent government regulation of software design and an unwarranted taking of Microsoft's intellectual property."

The government's conduct proposal asks Microsoft (stock: MSFT) to release all Windows proprietary information, without compensation, giving rivals access, said William Neukom, executive vice president for law and corporate affairs at Microsoft.

"Companies like IBM and Sun would receive billions of dollars worth of Microsoft proprietary intellectual property and enjoy a competitive advantage against us," Neukom said.

Consumers would no longer depend on the Microsoft trademark "for a consistent, predictable, high-quality operating system" if PC makers could distribute highly modified versions of Windows, he said.

"These confiscations of property are simply not justified under the Sherman Act, and it's unfair and not supportable under the law," Neukom said.

Microsoft, in its brief, set out a schedule of remedy hearings before the court. The company is seeking time to gather evidence if the court goes with any of the government's remedies, with a trial starting in October and possibly ending as late as Dec. 4. That would place the remedies hearing after the November elections.

The court has found violations in three areas, but Microsoft maintains it hasn't violated antitrust law, Neukom said. He added that there are benefits to consumers in the integrated design of the product -- an argument that was backed up by an appellate court ruling in 1998.

Neukom said the government went way beyond the scope of the Sherman Act in finding anti-competitive practices in the Internet browser market.

"There is nothing in the record that supports that Microsoft monopolized the browser market," he said. "That leaves you with these anti-competitive practices. But they don't violate the Sherman Act. We don't think it will survive appeal."

"We hope by the end of the process, we will be vindicated," Neukom said when asked whether the company could have avoided a trial by laying out the conduct remedies it proposed Wednesday earlier. "We believe the company has performed not in a way to violate the Sherman Act, but to benefit consumers."

The Department of Justice said Microsoft's proposal would not prevent it from attempting to divide markets with competitors, retaliating against PC makers and software developers that support non-Microsoft technologies, and trying to require PC makers to ship other Microsoft products with Windows.

"Microsoft's proposal is ineffective and filled with loopholes," the DOJ said. "The proposal fundamentally fails to repair the damage to competition caused by Microsoft's illegal acts, or prevent Microsoft from committing similar violations in the future."