A federal judge Wednesday ordered Microsoft Corp. split into two companies, prescribing the biggest corporate breakup since AT&T while harshly rebuking the software giant for stifling computer-age competition.
Potentially monumental, the ruling by U.S. District Judge Thomas Penfield Jackson was not the last word in a case that could define the limits of companies operating in a high tech economy.
Microsoft has promised to appeal in the case, which had been pressed by the Justice Department and 19 states. The case could go to the U.S. Court of Appeals or directly to the Supreme Court.
“This is the beginning of a new chapter in this case,” said Microsoft chairman Bill Gates. He called the ruling inconsistent with past court decisions and with the realities of the marketplace.
Jackson, who concluded two months ago that Microsoft had violated antitrust law, ordered the company to be split into these parts:
– One that would oversee the Windows operating system.
– A second that would handle all other Microsoft software, such as its “Word” program.
The Justice Department and 17 of the 19 states recommended that the company be broken into two pieces — one to own and market Windows, source of the company’s monopoly position, and another to control other software and the company’s Internet business.
Jackson’s ruling also forbids the company from entering into “exclusive dealing” that would restrict the development of competitors’ products.
“Microsoft, as it is presently organized and led, is unwilling to accept the notion that it broke the law or accede to an order amending its conduct,” Jakcson, explaining why he believed the breakup was necessary.
“Microsoft has proved untrustworthy in the past,” Jackson said, citing its failure to comply with a court ruling earlier in the 1990s that preceded the antitrust case.
The judge had ruled April 3 that Microsoft had violated federal antitrust law by using illegal methods to protect a monopoly in computer operating systems. He found the company tried illegally to expand its dominance into the market for Internet browsers.
Federal antitrust law allows for cases of broad public importance to go directly to the Supreme Court, but the justices do not have to accept the fast-track system.
If Microsoft appeals directly to the Supreme Court, it can send the appeal to the U.S. Court of Appeals for the District of Columbia, where it would be handled like virtually all other appeals from U.S. District Court rulings.
The only previous time the appellate court was bypassed in an antitrust lawsuit was the last case of this magnitude: the AT&T breakup in 1984.
Microsoft contended in a May 31 court filing that a breakup would have “significant and damaging” consequences.
The corporation sought a year to submit its own breakup plan, compared with the four months sought by the government.
As Microsoft was filing the final legal papers before Jackson’s ruling, Gates appeared Tuesday at a congressional hearing on the future of high technology around the world.
