DOJ claims breakup needed to rein in Microsoft

The U.S. Department of Justice (DOJ) and the 19 states that joined in its antitrust case against Microsoft Corp. Friday urged a federal appeals court to approve a breakup of the software vendor, arguing in a 150-page brief that Microsoft would still have the 'incentive and ability' to engage in anticompetitive conduct if it isn't split in two.

          The U.S. Department of Justice (DOJ) and the 19 states that joined in its antitrust case against Microsoft Corp. Friday urged a federal appeals court to approve a breakup of the software vendor, arguing in a 150-page brief that Microsoft would still have the "incentive and ability" to engage in anticompetitive conduct if it isn't split in two.

          In fact, the government appeared to claim that the antitrust case it filed in 1998 would have been all for naught if the U.S. Court of Appeals for the District of Columbia doesn't uphold the breakup order imposed against Microsoft last June by U.S. District Judge Thomas Penfield Jackson.

          Alternatives to Jackson's ruling that Microsoft should be split into two separate companies would fall short of leveling the playing field in the software industry, the DOJ said in its brief. It added that a breakup would "permit competition - rather than Microsoft, the government or the courts - to determine which technologies prevail in the marketplace."

          Friday's scheduled filing by the government is a response to the written appeal that Microsoft filed in late November. In its brief, the software vendor faulted virtually every aspect of Jackson's ruling and claimed that public comments he has made since the trial ended showed antagonism toward the company and violated judicial codes of conduct.

          In answer to the government's brief, Microsoft Friday reiterated its belief that it ultimately will prevail in the case. "Our appeal outlined a broad array of procedural, factual and legal errors committed by the district court, which we believe will result in the court's judgment being reversed," said company spokesman Jim Cullinan.

          The appeals court, which began its proceedings after the U.S. Supreme Court rejected a DOJ request that it directly hear Microsoft's appeal, has scheduled two days of oral arguments by the two sides on Feb. 26 and 27. A decision by the Appeals Court is expected by mid-year.

          Jackson ordered the company to be split into one company that would be responsible for its operating systems and a second one that would own the rest of its products. But Microsoft has steadfastly denied any wrongdoing, claiming that it doesn't have a monopoly in operating systems and hasn't engaged in the anticompetitive behavior found by the judge.

          Microsoft, in its November filing, accused Jackson of running a trial that was "highly unusual and prejudicial." The company's complaints included an assertion that the judge, "reportedly analogized Microsoft's executives to 'drug traffickers' caught on telephone wiretaps" during an interview about the trial.

          The DOJ's brief includes a point-by-point defense of Jackson's ruling, as well as his comments since the trial. The government said that the judge's remarks, taken in their entirety, "demonstrate neither bias nor the appearance of bias."

          Legal analysts have said the appeals court could ask Jackson to reconsider his ruling and replace the breakup order with one that puts limits on Microsoft's business conduct. But the DOJ claimed such an approach "would involve complex and highly intrusive restrictions on Microsoft's conduct, might result in regulation rather than consumer choice determining market outcomes, and would require continued monitoring of Microsoft's future activities."

          The government also said the new applications company ordered by Jackson would gain incentives "to invent new products that exploit a variety of technologies that may threaten the Windows monopoly" at the operating system level.

          Breaking up Microsoft wouldn't "re-create the threat" to Microsoft that was once posed by Netscape Navigator or Java, the DOJ acknowledged. But the separation "will restore marketplace conditions that foster such threats," it added.

          Meanwhile, a group representing anti-Microsoft vendors such as Oracle Corp. and Sun Microsystems Inc. Friday plans to file a friend-of-the-court brief supporting the DOJ's breakup effort that was written with the help of former Whitewater special prosecutor Kenneth Starr, who is a former judge on the D.C. appeals court.

          Starr "has been a really good and wise counsel," said Mike Petit, president of the Washington-based Project to Promote Competition & Innovation in the Digital Age, known more informally as ProComp. Starr plans to attend the February oral arguments in the case, but Petit said it's uncertain whether he'll have a chance to address the appeals court.

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