Government faces deadline on proposed Microsoft sanctions

WASHINGTON - The Justice Department and 19 states that successfully sued Microsoft for antitrust violations worked out last-minute details Thursday to sanctions proposed against the company.

Facing a Friday deadline, the government and attorneys general are expected to file a single proposal that will recommend breaking up the software giant in two parts to prevent it from engaging in any illegal behavior.

The proposal will be submitted to U.S. District Court Judge Thomas Penfield Jackson, who on April 3 ruled that Microsoft repeatedly violated federal antitrust laws intended to maintain competition. He found the company used its monopoly power in the operating systems market to crush rivals.

Jackson gave the government and the states the option of submitting separate briefs if they failed to agree on a remedy. Despite doubts expressed by some states on the divestiture plan, a single proposal will be filed with the court, according to people close to the talks.

''There will be one document which will be the voice for the Department of Justice and virtually all of the states,'' said one source, speaking on condition of anonymity, though ''one or two states may choose to put in an appendix or footnotes'' to record their difference of opinion in some areas.

Microsoft has said it plans to appeal Jackson's ruling, and company executives have insisted that no laws were broken. In an interview earlier this week with The Associated Press, Microsoft Chairman Bill Gates said divestiture of any part of the company he founded 25 years ago would hurt consumers and be ''a very inappropriate thing.''

New York State Attorney General Eliot Spitzer called the recent comments by Gates, along with those by the chief executive officer Steve Ballmer, ''fundamentally distortive.

''The truth is that Microsoft has been a monopolist found by a federal judge to have undercut innovation, and hence competition and consumer welfare,'' said Spitzer, pointing to passages of Jackson's April 3 ruling.

Microsoft has until May 10 to respond to the government's filing but has said it would request an extension to respond to a proposal as extreme as a breakup.

Under the government's proposal, Microsoft would likely be split into two parts. One company would sell Windows, the operating system that runs most of the world's personal computers. The other would handle applications software, such as the dominant Office software suite, which includes the word processor Word and the spreadsheet program Excel.

Justice Department officials gave an ''informational briefing'' on the proposal to White House economic advisers earlier this week ''because I think it is a significant and important case,'' said Attorney General Janet Reno.

In a separate document filed with the court Thursday, a group of prominent antitrust experts urged Jackson to order a more extreme measure - to ''clone the operating systems into three companies.''

The government's likely proposal ''is a move a right direction, but doesn't go far enough,'' said the brief's chief author, Robert Litan, a former Justice Department official who negotiated with Microsoft in a related 1994 case and now works for the Brookings Institution.

Other authors of the report are Roger Noll, an economist at Stanford University; William D. Nordhaus, a Yale University economist; Frederic Scherer, an economist at Harvard University's John F. Kennedy School of Government.

In addition to the government's lawsuit, Microsoft faces more than 100 private antitrust lawsuits. On Tuesday, a panel of federal judges consolidated 27 of them to a single court in Baltimore.

U.S. District Judge J. Frederick Motz will coordinate pretrial activities for the 27 claims, which were filed in 17 federal jurisdictions.

The private claims echo the antitrust charges detailed in the federal antitrust lawsuit but carry the potential for triple damages against Microsoft.