Judge hints at Microsoft break-up

Bill Gates in upbeat mood at the Windows 2000 launch

The judge in Microsoft's anti-trust trial said the software giant had a monopoly comparable to that of Standard Oil, which was broken up nearly 90 years ago.

In what is seen as a blow to Microsoft's case, Judge Thomas Penfield Jackson said he saw no distinction between the two.

He was speaking as lawyers for Microsoft and the US Justice Department returned to the courtroom for the last round of arguments before a final ruling in the trial.

The company is accused of breaking US anti-trust (monopoly) laws by using its position to squeeze out competitors.

That violates the Sherman Anti-trust Act of 1890 - which was prompted in part by the abuses of the Standard Oil trust.

John D Rockefeller's business at one time controlled 90% of the US oil market. It was sued by the government in 1906 and eventually split into 30 separate companies.

Secret talks

Microsoft could also be broken up if found guilty.

The long-running case could fundamentally change the way consumers buy and use the software needed for computers to operate.

Months of behind-closed-doors talks between the two sides in Chicago have so far failed to reach an agreement.

Without such a deal it is likely that the legal process, complicated by appeals, could take years to end.

Practices banned by US antitrust law

Monopolies "in restraint of trade"

"Predatory pricing" at below cost to drive out competitors

"Price-fixing", an agreement among several competitors to fix prices or restrict output

"Illegal business practices" including restriction on opening hours, resale price maintenance, and tie-in sales

Judge Jackson ruled last November that Microsoft had used its dominance in the personal computer operating system market to punish competing firms, with actions which had also harmed consumers.

This latest - and last - round of court argument concerns the question of whether Microsoft's actions broke anti-trust laws.

The fact that the hearings were not delayed suggests that little progress has been made in the Chicago meetings headed by mediator Judge Richard Posner.

He is continuing to meet each side separately.

Judge's main findings of fact

Microsoft's share of PC operating systems extremely large

Dominant position protected by high barrier to entry

Customers lack commercially viable alternative to Windows

After Tuesday's hearing, Joel Klein of the Justice Department said it was convinced of Microsoft's massive illegal behaviour.

The greatest harm had been caused to those products which had been deterred from coming to the market.

"As far back as you can see there was a Microsoft monopoly and as far forward as you can see," said Mr Klein.

"That contrast tells you about the innovation, consumer choice and fundamental competitive issues that are at stake in this case."

During the hearing, Microsoft's lawyer, John Warden, had reiterated one of the company's main arguments - that it competed vigorously and ruthlessly, but within the scope of the law.

He urged the judge not to rewrite the law so that companies were deterred from competing as hard as they could.

The return to court follows a dispute last week on whether Microsoft's chairman, Bill Gates, would offer a key concession to government lawyers in order to settle.

The Bloomberg news agency said it asked Mr Gates, moments after a televised interview had ended, whether he would be willing to disclose the secret blueprints for the company's Windows software if that would settle the case.

Bloomberg reported that Mr Gates answered, "yes, if that's all it took". But Microsoft later forcefully insisted Mr Gates never made the remark.

Possible options

BREAK UP:

Split microsoft into separate companies selling operating systems, applications and internet content

OPEN SOURCE CODE:

Competitors could add or modify Windows to use their own software

FAIR PRICING:

Bar Microsoft from giving discounts to companies which exclusively use their software

BABY BILLS:

Create several smaller identical versions of Microsoft.

It is understood that last June the government pressed Microsoft directly whether it would consider opening its source code, with the suggestion rejected by the company.

Since then Judge Jackson has ruled in his preliminary finding of fact that Microsoft did exude monopoly power in personal computer operating systems. He also accepted most of the government's arguments.

The unusual decision to split the result was believed partly to have been an attempt to encourage a settlement.

The judge's decision is expected within six weeks. If the government were to prevail, he has indicated he will organise more legal proceedings to determine what actions to take against Microsoft.

He could order Microsoft to change its business practices, such as imposing bans on restrictive contracts between the company and computer makers. He could force Microsoft to disclose its source code, or he could restructure its software empire.

The Justice Department is reported to favour a proposal to break Microsoft into three parts.

Microsoft objects to any break-up, describing such a decision as a death sentence on the company.