Government Asks Court to Rule That Microsoft Violated Sherman Act

The news pressured the stock in after-hours trading.
Publish date:

The government asked the federal judge in the


(MSFT) - Get Report

antitrust case Monday evening to rule that the software maker had violated several sections of the

Sherman Antitrust Act


The request by the

Justice Department

, as part of its proposed conclusions of law, follow the

findings earlier last month by Judge Thomas Penfield Jackson that Microsoft was a monopoly, and it represents the second of three steps that could result in a final verdict.

But Jackson has also

named a mediator in the case, Judge Richard Posner of the

7th U.S. Circuit Court of Appeals

. He has reportedly set three rounds of talks over the next two weeks.

Despite this expected and incremental step in the antitrust case, traders knocked Microsoft's stock price down 1 9/16, or just under 2%, to 93 7/8 in after-hours trading. The shares had previously ended regular trading at 4 p.m. EST down 3/4 at 95 7/16.

The Justice Department asked Judge Jackson to rule that Microsoft committed two violations of section 1 of the Sherman Act and one violation of section 2.

The section 1 allegations contend the company unlawfully tied its


Web browser to its


operating system and that it entered into business partnerships that, though usually legal, constitute unfair business practices when undertaken by a monopolist.

The section 2 allegations contend that Microsoft unlawfully maintained its monopoly on operating systems by, among other tactics, pressuring Netscape to stay out of the platform business.

"While we disagree with the government's arguments, we look forward to presenting our conclusions to the court," a Microsoft spokesman said.

The company's proposed conclusions are due Jan. 17, after which the Justice Department is set to reply on Jan. 24. Then the company has one more chance to file written arguments on Jan. 31 before oral arguments take place on Feb. 22.

The company wouldn't comment on the progress of the negotiations or whether lawyers had met with Judge Posner.

Analysts said the company's stock will likely shiver every time a development in the case occurs, no size too small.

"It's not surprising that the DOJ would come up with some pretty strong wording," said Jeffrey Maxick, who covers the software giant for

Madison Securities

. "When Microsoft files their document, the same thing will probably happen." Maxick rates the stock a buy,and his firm hasn't done underwriting for the company.

"What's really important is progress toward a settlement, not all the posturing that's going to go on," Maxick said.