How should Microsoft be punished?

In the belief that Microsoft will either lose its antitrust case or settle, antitrust experts, industry groups and some software businesses met last week to debate possible remedies in this historic case.

But what remedies? Most experts at the conference, sponsored by groups created by US consumer advocate Ralph Nader, seemed to agree that anything less than the break-up of the company or forced licensing of its Windows source code won't restore competition.

"What the government needs to do is get a powerful enough remedy to kick start the market," said Steven Salop, a law professor at Georgetown University in Washington, D.C.

"If you don't get the remedy right then the whole exercise (the government's antitrust case) is just worthless," said Joseph Simmons, a partner at Washington lawfirm of Roger & Wells.

"A bad remedy can be worse than not bringing the case at all," said Simmons. If the defendants in an antitrust case see no real penalty for their actions they may be emboldened, he added.

Conduct remedies -- remedies that essentially are pledges by a company to change its behaviour -- will require long-term government oversight and won't remove the company's incentive to re-consolidate its power, said Washington attorney Glenn Manishin. Manishin had prepared a Software Information Industry Association paper which was sent to the US Department of Justice that recommended creation of Baby bell companies.

But Stan Lebowitz, a professor at the University of Texas in Dallas, said forcing a company to break up or license its code would raise the prices of products. Software vendors would have to spend more money on research and development and support costs to develop applications that can work with different Windows operating systems.

Ed Black, the president of the Computer and Communications Industry Association in Washington, said any remedy must also reform Microsoft's "corrupt corporate culture," and "rid itself of those forces that have led it down the path of ignoring the law".

Microsoft and the government have been holding settlement talks, but there are no indications that one is forthcoming. Trial has been in recess since the end of February and is expected to resume May 17, but could restart later than that due to another case the judge is hearing.

Meanwhile, the case is moving forward. Microsoft this week deposed a former executive of Netscape Communications who was involved in talks the company had to merge with America Online, and was deposing a Sun executive on Friday. Microsoft is trying to show that AOL's acquisition of Netscape, and subsequent partnership with Sun Microsystems, posed a competitive threat to Microsoft, thus undercutting the government's claim that Microsoft is a monopoly.

Jean-Louis Gassee, the CEO of operating system maker Be, said Microsoft has tremendous power over original equipment manufacturers (OEMs).

"I've seen grown men quake when considering doing things that might displease Microsoft," said Gassee, who has been trying to convince OEM's to install Be's operating system. He wants a remedy that sheds light on OEM contracts, "so nobody can hide and do backdoor deals".

But Microsoft proponents say the government is just punishing Microsoft for its success in a market that seeks a common software standard.

"You pretty much have to fail in order to prove you aren't doing something wrong," said Jonathan Zuck, president of the Association for Competitive Technology, a Washington, D.C.-based group that has been lobbying for Microsoft during the trial.

Ted Johnson, co-founder of Visio, which makes software used in design for the Windows, said Microsoft's success is a result of the thousands of third-party developers that have built applications for the platform. Johnson said he doesn't want to have to spend money porting his applications to different versions of Windows.

Microsoft representatives were invited to attend the conference but declined, according to Nader.

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