California, 16 Other States Unite With Us Justice Department in Proposed Antitrust Remedies for Reorganization of Microsoft

(LONG BEACH, Calif.) - Attorney General Bill Lockyer today in a joint state-federal plan called for reorganizing Microsoft into two separate and competing companies to end what a federal judge has ruled is illegal monopoly control in the operating system market for personal computers.

"The proposed remedies target the core abuses of the Microsoft monopoly," Lockyer said. "These remedies are carefully tailored to restore competition and innovation. By creating two companies, we are looking to create robust competition to give consumers choice in software products at competitive prices."

The proposed remedy, supported by 17 states and the US Department of Justice, was filed with federal Judge Thomas Penfield Jackson, who in early April concluded that Microsoft is guilty of violating state and federal antitrust laws. The judge found that Microsoft engaged in a broad pattern of illegal conduct, injuring consumers and thwarting competition to illegally maintain its control of the market.

Under the joint state-federal plan, Microsoft would be divided into two companies. One company would sell Microsoft's operating system software like Windows 98 and Windows 2000. The other company would sell Microsoft's applications software like Microsoft's Office Productivity Suite. The two companies each would be able to sell Microsoft's current web browser, Internet Explorer, producing direct competition in this market.

Microsoft would be subject to specified conduct oversight by the court for three years after the reorganization is complete. The limitations include: prohibitions against technological and contractual tying; full disclosure of operating system interfaces to competing software makers; and protections for manufacturers who choose to use non-Microsoft applications or browsers.