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DOJ rejects Microsoft plan
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June 5, 2000: 5:08 p.m. ET
Justice says no to almost all of remedy changes software maker requested
By Staff Writer David Kleinbard
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WASHINGTON (CNNfn) - The Justice Department Monday advised a federal judge to reject almost all of the changes Microsoft Corp. wants to make to the government's proposal to break up the software maker.
In a filing with the U.S. District Court in Washington, the Justice Department acquiesced to only a handful of very technical revisions Microsoft suggested to the court last week. The almost trivial changes the government agreed to include the insertion of a comma to correct a typographical error and calling a split of Microsoft a "divestiture" instead of a "reorganization."
"Nothing that had real substantive punch in the government's original proposal was watered down," said William Kovacic, a professor at George Washington University Law School who has followed the Microsoft case closely. "The government's filing today is designed to give Microsoft the sense that the process in the remedy phase was carried out correctly, and it provides the judge with ammunition that he could use as a rationale for the measures contained in his final ruling."
The Justice Department and 17 state attorneys general retained their previously proposed plan to divide Microsoft into an applications company and an operating system company, and to impose several restrictions on how Microsoft prices its products and interacts with PC makers and competing software firms.
Microsoft (MSFT: Research, Estimates), for its part, believes that Monday's filing doesn't even approach a fair process.
"The government has only made cosmetic changes to its vague and ambiguous proposal," said Microsoft spokesman Jim Cullinan. "Their plan remains unprecedented, excessive, and harmful. The exercise of the past few days does not substitute in any way for a legitimate process, in which Microsoft could have challenged the government's assumptions and assertions related to its unprecedented breakup plan and draconian regulations."
Reject request for more time
 The government advised Judge Thomas Penfield Jackson, who is overseeing the landmark antitrust trial, to reject Microsoft's request to extend the amount of time the company would be given to draft a breakup plan, if the court orders such a split. Microsoft had wanted a year after the entry of a final judgment to draft a divestiture plan, while the government has proposed a four-month period.
"It is in the public interest that the remedy contemplated by the final judgment be implemented as soon as possible, and the time periods proposed by the plaintiffs are adequate to perform the specified tasks, which involve only preparation of and commenting on the plan of divestiture, not its implementation," the Justice Department said in Monday's filing.
"Microsoft wants to postpone as long as possible the creation of a document that describes how the company could be broken up," said GWU's Kovacic.
The Justice Department's proposed split is designed to prevent Microsoft from using its monopoly power over PC operating systems to crush competition from "middleware," such as Netscape's Navigator browser and Sun's Java technology. Middleware is software that operates between an operating system and another type of software application. The government advised Judge Jackson to reject any changes proposed by Microsoft that would hamper the ability of competing middleware to interoperate with Windows.
Uniform Windows pricing for PC makers
Lawyers for the Justice Department also advised Jackson to reject Microsoft's demand for a definition of the term "Web browser" and the company's request to be able to treat PC makers in a non-uniform manner by taking into account annual unit volume and other "objective criteria."
The changes Microsoft proposed would allow the company to punish PC makers that don't support Microsoft software by imposing unfavorable licensing terms and conditions for Windows, the government said.
"Such terms and conditions are extremely important to original equipment makers, and Microsoft has used them in the past to threaten or retaliate against original equipment makers and could do so again," the government's filing said.
 Justice also recommended rejecting Microsoft's request that the court's final judgment remain in place for four years, rather than the 10 years the government wants.
"Despite its assertion that ten years is an extraordinarily long time in the software industry, Microsoft has had the dominant position in the operating systems business for at least a decade, and under the circumstances, there is no sound justification for entering a decree of shorter duration."
Do you still have that e-mail I sent?
Finally, Justice said that there is "no sound reason, in light of the evidence in this case" that Microsoft should not be required to retain e-mails sent by its top management. Microsoft's claim that the government has never had difficulty obtaining relevant e-mail from Microsoft is contradicted by testimony given by Microsoft Chairman Bill Gates, the Justice Department filing said.
The government attached a deposition to its filing in which Gates says "I don't keep most e-mail I receive" and "I delete 98 percent of my e-mails," and "I don't preserve messages that I send."
Monday's filing is the second time the government has revised its proposed remedy for Microsoft's anticompetitive conduct. It made a series of largely technical corrections May 26, two days after Judge Jackson abruptly ended hearings in the case.
Judge Jackson had been expected to issue his final ruling in the landmark antitrust case last week. But in a surprise move, the judge gave both sides more time to file additional comments before he issues a ruling that could call for a breakup of the software company.
Microsoft has until Wednesday morning to reply to the government's new filing, if it chooses to do so.
The details of the government's proposed remedy against the company are important to Microsoft because some of its provisions may go into effect while the case is still in the appeals process.
Shares of Microsoft gained 9/16 Monday to close at 66-7/8 on the Nasdaq Stock Market. 
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