Judge's next step: What to do about Microsoft?

Wednesday, April 5th 2000, 12:00 am

By: News On 6

WASHINGTON (AP) -- The judge who ruled that Microsoft illegally competed by taking advantage of its monopoly power set a schedule today to consider what kind of puliminating the chance he would "fast track" the case on appeal to the U.S. Supreme Court.

U.S. District Judge Thomas Penfield Jackson is tentatively scheduled to begin holding hearings on the case on May 24,according to sources close to the case.

During a private meeting, he gave attorneys for the Justice Department and the 19 states suing Microsoft until the end of this month to submit their proposed remedies. Jackson gave Microsoft slightly less than two weeks to respond to that proposal, and the government another week for a rebuttal.

In a private meeting Tuesday, Jackson told those involved that he wanted to "fast track" the appeal directly to the Supreme Court to avoid delays that could "disrupt the economy." "I would be remiss if I didn't tell you that I will be inviting from the government a motion to provide for direct review in the Supreme Court," the judge said, according to transcripts provided by the court.

Jackson said his "transcendent objective is to get this thing before an appellate tribunal -- one or another -- as quickly as possible because I don't want to disrupt the economy or waste anymore of yours or my time on a remedy if it's going to come back here" on appeal.

Jackson told both sides to give him their "best and final offers" from last weekend's settlement discussions because he wanted to know "where each of you is coming from."

However, during today's meeting, according to a participant, he dropped that issue to allow room for future negotiations for a settlement.

Jackson's challenge now is to craft a remedy that won't hamper Microsoft's ability to compete effectively in an industry that is changing at warp speed.

Unlike his ruling Monday -- a sweeping verdict that handed the government a powerful but widely anticipated victory after nearly two years of legal wrangling -- the punishment Jackson will dispense is uncertain. He will hold hearings to explore the options, taking into consideration recommendations from Microsoft, the Justice Department and 19 states involved in the case.

"The dilemma for the judge and for the Justice Department is how to make the remedy effective without making it overly regulatory," said Warren Grimes, an antitrust expert who teaches law at Southwestern University School of Law in Los Angeles.

Jackson has a number of options, from breaking up the company that made co-founder Bill Gates a billionaire to ordering Microsoft to change its business tactics.

Among the milder remedies would be prohibiting Microsoft from using price as a way to punish clients who do business with competitors or forcing the company to relinquish control of the first screen most people see when they turn on their computers. Microsoft also could be ordered to license, if not completely surrender, the lucrative blueprint, the so-called source code, for its dominant Windows computer operating software.

Joel Klein, who heads the Justice Department's antitrust division, offered few hints at what remedy the government would seek, other than it would "protect consumers, innovation and competition by putting an end to Microsoft's widespread and persistent abuse of its monopoly power ... (while) rectifying its unlawful attempt to monopolize the Internet browser market."

Even though the government reportedly dropped its pursuit of a company breakup during failed settlement talks, Jackson's ruling may have emboldened Justice attorneys to ask for the toughest penalty possible.

There are several scenarios for breaking up the company, said attorney Glenn Manishin, who helped write a study for a prominent trade association that endorsed a divestiture. The judge could split Microsoft into companies selling separate products, such as Windows software and Internet content, or break it into several or "mini-Microsofts" -- each with identical products.

"The drastic is the most effective and the most conservative approach to dealing with a monopoly," Manishin said. The alternative is a set of court-enforced provisions that rarely curb behavior effectively, he said. Such an injunction, Manishin said, would be a "black hole of judicial regulation."

"Black holes suck up everything around them -- it would suck up all the resources of the Justice Department, all the time of the judge, and all the competitors would be focused on one courtroom in Washington where they would run when they had a complaint about Big Brother Bill," he said.

Jonathan Zuck, president of the Association for Competitive Technology, a pro-Microsoft group, said the idea of breaking up the company is "clearly universally recognized as ludicrous." "The whole point of a remedy is it's supposed to do some good. It's not meant to be punitive," Zuck said. "So no matter how mad the (plaintiffs) may be at Microsoft, remedies are supposed to create a better environment."

Grimes acknowledged that a company breakup might not go down well with the public, whose opinion may be a factor to Jackson, but it may be the easiest way to enforce antitrust laws.

"Once it's broken up, you don't need to supervise it anymore because you just have competing companies," he said. "Whereas, if you try to use behavioral sanctions that have to be monitored, you end up with the potential for a lot of government supervision of Microsoft's behavior, and no one wants that."