MICROSOFT - 3 WAY BREAKUP BEING CONSIDERED BY COURT.

On Wednesday, May 24, U.S. District Court Judge Thomas Penfield Jackson presided over a further proceeding in which he must decide whether to rule immediately on the government's proposed breakup of the company or alternatively to grant Microsoft's request for substantial hearings.

In very pointed questioning Judge Jackson signaled that he will consider breaking the company into three entities rather than two. He questioned the government attorneys as to why they did not advocate a three way breakup and favorably mentioned a "friend of the court" brief which advocated a third company focused around the Internet browser software.

In April Judge Jackson had ruled that Microsoft had violated federal antitrust laws when it attempted to monopolize the market for Internet browsers. The remedies which he must now consider must at a minimum preclude future illegal action, and restore competition within the industry.

He ordered the government to submit a final proposed remedy by Friday, May 26 and give Microsoft only 48 hours to reply.

It appears that there will be no extensive further hearings as requested by Microsoft, although Microsoft complained bitterly that it was being denied due process.

Because of the extreme nature of the relief requested by the DOJ, further hearings would normally be necessary to develop an expanded record on the remedy implications. Any appellate review of Jackson's decision must have an adequate record on remedy as well as liability in the case. Microsoft has argued that the proposed breakup is such a radical remedy that there should be extensive fact finding and an opportunity to examine the government's experts and probe the supporting material relied upon in support of the government's proposed remedies. Microsoft is requesting six months in which to examine the plan. The Judge flat out rejected further proceedings.

There is also the political implications of the case in that Microsoft believes it has a better chance of prevailing before the U.S. Court of Appeals, and perhaps ultimately the Supreme Court, since there is reason to believe that the U.S.C.A. has taken a different position than Judge Jackson on certain critical factors relied upon in his decision.

The impending national election in November also holds out the prospect that a change in administrations would result in a different attitude by the Department of Justice if a Bush administration is elected.