Washington, Nov. 10 (Bloomberg) -- Now that a federal judge
has found Microsoft Corp. took aggressive steps to protect its
monopoly for personal computer operating systems, antitrust
enforcers face the task of crafting proposed remedies to restore
competition without undermining innovation and industry
standards. Here are some commonly asked questions about possible
sanctions.
Q: When would the judge impose sanctions against Microsoft?
A: U.S. District Judge Thomas Penfield Jackson wouldn't
impose any sanctions until after he has decided whether Microsoft
violated the Sherman Antitrust Act. Jackson's findings of fact
issued last week, however, set the stage for such a ruling,
sometime after Feb. 1. He has given both sides until Jan. 31 to
complete legal arguments. The government has asked for a separate
hearing on what remedies, or sanctions, the court should impose
if it finds Microsoft's business practices were illegal.
Q: What are the types of remedies the judge could impose on
Microsoft?
A: There are two categories of sanctions that the judge
could order. Jackson could impose so-called conduct remedies,
such as barring Microsoft from certain business practices. These
could include forcing Microsoft to reveal to all computer makers
the price it charges for Windows. This would prevent Microsoft
from pressuring companies not to promote rival software products,
as Jackson found, with threats of higher prices. A structural
remedy would range from forcing Microsoft to license the
proprietary Windows operating system source code to several
competitors to breaking up the company into parts.
Q: What sorts of remedies are antitrust enforcers
considering?
A: Both federal and state antitrust enforcers say Jackson's
findings of widespread practices designed to foil competition
justify consideration of tough remedies to preclude Microsoft
from continuing to use its monopoly to foil competition and
stifle innovation.
Antitrust enforcers want ``to make sure what has happened in
the past doesn't happen in the future' and that Microsoft
``doesn't use their monopoly in an illegal way to maintain the
monopoly or extend their monopoly into other markets,' said Tom
Miller, Iowa's attorney general
Miller and Joel Klein, the Justice Department's chief
antitrust enforcer, say structural remedies will be among those
considered, including breaking up the company.
``There are advantages and disadvantages of most remedies,'
Miller said. ``It is a really intricate matter of balancing the
advantages and disadvantages of each remedy.'
Q: How would a licensing of the Windows operating system
work?
A: To dismantle Microsoft's monopoly over personal computer
operating system software, the court could order the company to
auction the Windows software code to two or three competitors.
The companies would pay a licensing fee to Microsoft for the
right to sell a competing version of Windows, which currently
runs 95 percent of the world's PCs. Competing Windows producers
would be allowed to add certain features to make their version of
the operating system different from the others. An alternative
scenario would be simply to break Microsoft into several
competing companies, each with the same product lines. This
scenario would leave the value of Microsoft's products in the
hands of its shareholders yet promote competition, much as the
1984 breakup of American Telephone and Telegraph Corp. did.
Q: Wouldn't setting up competing versions of Windows
fracture the Microsoft-established industrywide standard that
ensures everyone's personal computer can connect to the Internet
and run software applications like the popular financial planning
program Quicken?
A: Competition would provide powerful incentives for the
Windows producers to adhere to an industry standard that would
allow all software applications to run in any Windows-type
operating system, experts say.
``It is not in anybody's interest to create Balkanization,'
said Ed Black, president of the Computer & Communications
Industry Association, a Washington-based trade group.
Additionally, state antitrust enforcers are considering
private standards-setting organization ``that would maintain a
standard that would be usable by everybody,' Miller said.
Industry representatives say they would oppose standards
setting. ``A standards body approving and disapproving
improvements to the operating system would just stifle
innovation,' said Ken Wasch, president of the Software &
Information Industry Association.
Q: What are the alternative ways of breaking up Microsoft?
A: Microsoft could be split into three or more equal parts
with each given all the intellectual property and product lines
that are now sold by the world's largest software company.
Microsoft's monopoly would be ended by forcing the ``Baby Bills'
to compete against each other. An alternative would be to divide
Microsoft into a company that makes the Windows operating system,
another that sells software applications and another that is
involved in Internet commerce. Critics of this scenario say it
would do nothing to dilute Microsoft's monopoly over Windows.
¸1999 Bloomberg L.P.
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