MS/DOJ: Week 13: MS falters in its defense

Microsoft Corp. appeared to stumble last week in its attempt to kick off its defense against the U.S. government's antitrust charges when its first witness conceded some points.

Microsoft Corp. appeared to stumble last week in its attempt to kick off its defense against the U.S. government's antitrust charges when its first witness conceded some points.

Microsoft's first witness, Richard Schmalensee, dean of the Sloan School of Management at the Massachusetts of Technology, was supposed to counter the main economic arguments that the U.S. Department of Justice and 19 states are making in their broad antitrust case against the software giant.

But lead government trial attorney David Boies, who started his cross-examination last week and finished Wednesday, got Schmalensee to concede some points that could be crucial to the government's case.

The heart of the government's argument is that Microsoft has illegally used its Windows monopoly in the desktop operating systems market to damage competition. The basis of Schmalensee's argument is that the PC desktop operating system is not a "relevant market" as far as the government's charges are concerned because Microsoft is threatened by cross-platform technologies, such as Java, and Internet browsing technologies.

Boies, however, essentially got Schmalensee to acknowledge that if PC manufacturers are unhappy with Windows-related contractual restrictions, there are no viable alternative desktop operating system suppliers for them to turn to -- at least, in the short term.

Boies also, by way of analogy, scored some points on the issue of application integration. This is a key issue, since the government alleges that consumer choice suffered as a result of the bundling of Microsoft's Internet Explorer (IE) browser and Windows.

Boies asked Schmalensee whether consumers would benefit if Microsoft's word processing software MS Word was integrated in the operating system in much the same way as Internet Explorer. Schmalensee said there could be benefits, but he also acknowledged under questioning that if rival word processing programs, such as Corel Corp.'s WordPerfect, didn't work as well as a result of Word's integration, then there could be consumer harm.

"If in some way I can't do it as well as before, that's a harm," said Schmalensee.

In earlier testimony, The Boeing Corp. said it may have to switch from Netscape Navigator, as its standard corporate browser, to Internet Explorer because of Internet Explorer's tight integration with the operating system. The company wants to avoid the expense of supporting two browsers.

Boies also pressed a faltering Schmalensee about whether an internal Microsoft document that described Microsoft's most recent version of the company's Internet Explorer browser as "not compelling" belies the company's claim that its browser gained market share because of technological improvements.

After Boies finished with Schmalensee Wednesday, Microsoft started its attempt to rehabilitate him, a process which will culminate Monday in a closed door session to examine Windows pricing data with the economist.

The government examined Windows pricing data with its own economic expert earlier in the trial, and used the information to try to prove its allegation that Microsoft has monopoly control of operating system pricing. At the request of Microsoft and the PC manufacturers, details of the pricing data, and the trial sessions in which they are examined, have been closed to the public -- though the main issues relating to the data have been argued in open court.

Also Monday, Microsoft is expected to put on the first of a string of its own executives, who are expected to try to put into context -- one that is favorable for the company -- the masses of e-mail and videotaped deposition segments that the government has entered into evidence. Paul Maritz, the group vice president for platforms and applications, will be first up, and is expected to answer questions about specific actions the government alleges the software giant took to damage competitors.

(This article is based on trial reports from Patrick Thibodeau, senior writer at Computerworld, and Elizabeth Wasserman, Washington bureau chief for The Industry Standard.)

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