In strong and uncompromising language, Judge Thomas Penfield Jackson rejected Microsoft’s request for additional time to defend itself against antitrust violations Wednesday, and ordered that the company be both broken up and restrained from leveraging its monopoly power in the marketplace.
In essence, Jackson told Microsoft that its own long record of untrustworthy behavior merited it no lenience.
“Microsoft as it is presently organized and led,” he wrote, “is unwilling to accept the notion that it broke the law or accede to an order amending its conduct.” Therefore, he said, the company must be divided and closely monitored.
In his Memorandum and Order, the judge scoffed at Microsoft’s declaration that it had been unprepared for the extremity of a divestiture ruling. “Microsoft’s profession of surprise [at the order to break up] is not credible,” wrote the judge, arguing that Microsoft should have known from the beginning of the trial that such an outcome was possible, and should have been particularly aware of the possibility after the release of his findings of fact in November 1999.
Though the judge ruled that Microsoft was a monopoly and had broken the law by abusing its monopoly power, the company did not ready itself for an adverse ruling, Jackson’s order declared — instead, Microsoft stalled.
Clearly irritated by Microsoft’s record of behavior during the two-year trial, Jackson held no punches in his Memorandum and Final Order, a document that’s likely to be remembered as a remarkably compelling rebuke for corporate misbehavior.
“Microsoft has proved untrustworthy in the past,” wrote Jackson. “In earlier proceedings in which a preliminary injunction was entered, Microsoft’s purported compliance with that injunction while it was on appeal was illusory and its explanation disingenuous. If it responds in similar fashion to an injunctive remedy in this case, the earlier the need for enforcement measures becomes apparent, the more effective they are likely to be.”
In other words, the judge decided that Microsoft doesn’t deserve any more time to prepare its defense, since it would likely use that time to further consolidate its market power.
Microsoft now has four months to prepare a plan for the ordered breakup; according to Jackson’s Final Judgment, one company will be responsible for operating systems and one for software applications. Although Jackson has given Microsoft breathing room to appeal before forcing a breakup, he has ordered a long list of “conduct remedies” for immediate implementation that are aimed at prohibiting the company from anti-competitive activities. The list reads like a litany of everything Microsoft’s competitors have accused the company of doing over the past decade.
Jackson gave the Justice Department everything it asked for, directing that Microsoft be prohibited from leveraging its dominant market share to force computer makers and software manufacturers to toe the Microsoft line. If the judge’s ruling can be enforced, Microsoft will no longer be able to gain a competitive advantage through license restrictions or price manipulation; for example, the order will result in computer makers such as Dell or Gateway being allowed to alter the operating system as they see fit or add other software programs into the default installation.
But while Jackson’s memorandum made for gripping reading, given the severity of its rhetoric, Microsoft executives adhered to their long-standing party line.
Microsoft chairman Bill Gates, in a formal press release responding to the decision, called Jackson’s decision “burdensome” and “unreasonable” and asserted that it would be overturned on appeal. “This ruling is inconsistent with past decisions by the Appeals Court and the Supreme Court that support product improvement; it is unreasonable in its call to break up Microsoft and regulate software design; and it contradicts the reality that consumers see every day,” Gates said. He added that he is looking forward to “putting this case behind us once and for all” in the appellate court.
Meanwhile, Bill Neukom, Microsoft’s senior vice president for law and corporate affairs, complained, “This unprecedented order against Microsoft was conceived by our competitors, drawn up by the government and imposed by this ruling without a single day of testimony or scrutiny.”
Microsoft will immediately file a notice of appeal and motion to stay Jackson’s orders; in the meantime, said Steve Ballmer, Microsoft’s president and CEO, the company will continue to “focus on building the next generation of great software” just as it always has.
Of course, the antitrust proceedings are far from over. Though Jackson has made every effort to accelerate the appellate process, Microsoft has not yet had its last day in court. In a press conference held after the release of the Memorandum and Final Order, Gates said, “I’m reminded of the old saying that today is the first day of the rest of your life. I believe very strongly that today is the first day of the rest of this case.”