January 12, 2000 11:25 AM PST

DOJ calls report of Microsoft breakup "inaccurate"

The Justice Department described as "inaccurate" a news report today indicating the government had decided to break up Microsoft, although it stepped away from providing details about ongoing negotiations with the company.

Justice Department spokeswoman Gina Talamona responded to a story in today's USA Today indicating government lawyers had reached a consensus on splitting Microsoft into at least two companies. One would focus on the operating system, while another would concentrate on applications.

Microsoft's Web properties would go into a third company or get folded into one of the other two companies. In the past, a number of experts have discussed the possibility of such a division.

"The story is inaccurate in many respects. It does not accurately represent our view," she said.

Talamona, however, did not go so far as to say government lawyers had not reached a consensus or planned to break up the Redmond, Wash.-based software maker. She also declined to specify the exact inaccuracies.

Microsoft, for its part, declined to comment as well and once again repeated its stance that a break-up is unwarranted.

"We can't speculate what the government may be thinking," said Microsoft spokesman Jim Cullinan. "We think it is completely inappropriate and counterproductive for anyone to be talking about the confidential mediation process, which has been established by this court. We will not comment on anything going on in mediation."

Putting mediation aside, "the notion of breaking up Microsoft is an extreme and radical proposal that is simply not justified by anything offered in this case," Cullinan said.

Rumors of a breakthrough follow two days after Microsoft surprised the world by settling a private antitrust action filed by Caldera. The trial was slated to begin Feb. 1.

If government lawyers have reached an agreement about how to handle Microsoft's day in court Microsoft, they may have removed one of the biggest barriers to ultimately resolving the case.

U.S. District Judge Thomas Penfield Jackson asked Judge Richard Posner, who heads the U.S. Court of Appeals for the Seventh Circuit, to mediate settlement talks. Jackson did this in part because of division within the government over what to do about Microsoft.

In the antitrust case, the Justice Department and 19 states contend Microsoft used its Windows monopoly power to crush rival Netscape Communications in the Web browser market. Jackson's stinging findings of fact issued on Nov. 5 Full text of Judge Jackson's findings of
fact almost guarantee a ruling against Microsoft, expected by March, said legal experts.

While settlement talks continue, Microsoft and the government will file three briefs over the coming weeks. On Tuesday, Microsoft will deliver to the court its conclusions of law. The government filed a similar document on Dec. 6.

On Jan. 25 and Feb. 1, the government and Microsoft will each file rebuttal documents to the other's conclusions of law.

The timing of today's news is noteworthy, given Monday's merger announcement You've got Time Warner between AOL and Time Warner. AOL, which owns Netscape, would become a powerful Microsoft adversary, supporting the software maker's argument that the competitive landscape is changing.

While such changes would not exonerate Microsoft's past behavior, they could affect settlement talks or eventual remedies should Microsoft be found guilty, as many legal experts expect it will.

"The merger does improve somewhat Microsoft's negotiating position in terms of the durability of their market power and the severity of solutions needed to resolve it," said George Washington Law School professor Bill Kovacic.

The merger and other competitive changes also undermine potential remedies, Kovacic said. "When you look out over the horizon and think how long it will be before there is a final result in the appeals, how confident can anyone be (of) what kind of (difference) controls will make 30 months from now?"

 

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