MS/DOJ: Govt. Grills Witness

The U.S. government will continue its cross-examination of Microsoft Corp.'s sole economic witness tomorrow, after spending most of today pursing its claim that the company illegally tied its Internet browser to its operating system.

The U.S. government will continue its cross-examination of Microsoft Corp.'s sole economic witness tomorrow, after spending most of today pursing its claim that the company illegally tied its Internet browser to its operating system.

Richard Schmalensee, the dean of the Sloan School of Management at MIT, argued that the integration of the browser with the operating system didn't hurt competitors, namely Netscape Communications Corp. Netscape's loss of market share was a "consequence of competition" and the wide availability of Microsoft's rival Web browser Internet Explorer, he said.

The U.S. government, to show that Microsoft acted illegally, must prove that the software company's actions hurt competition, not just competitors.

David Boies, the lead government attorney, pursued that issue by way of analogy today, asking his witness 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.

The U.S. government's "tying" claim rests on tenuous ground. To win that point, the government must overcome a Court of Appeals ruling last summer that termed the union of Windows 95 and Internet Explorer "a genuine integration" and said Microsoft isn't prevented from offering the browser as an integrated product.

The government believes consumer choice suffered as a result of this integration. For instance, the government cited earlier testimony from The Boeing Corp., which said it may have to switch from Netscape Navigator, as its standard corporate browser, to Internet Explorer because of IE's tight integration with the operating system. The company doesn't want the expense of supporting two browsers on the desktop.

Boies expects to finish his cross-examination of Schmalensee by midday tomorrow.

Microsoft executive Paul Maritz, group vice president of the platforms and applications group, will follow Schmalensee on the witness stand. Maritz is scheduled to appear in court on Monday.

Maritz -- through his numerous e-mails entered as evidence throughout the trial -- has already been a prominent figure in court. Maritz was one of the key decisions makers at Microsoft, in particular, on issues involving Internet Explorer.

In other testimony today, Boies took Schmalensee through a series of questions that attempted to establish when he became aware of Microsoft's decision to offer its browser for free.

The government has been attempting to show that Microsoft used predatory pricing, along with tying the browser to the operating system, to combat Netscape. Microsoft has argued that its decisions regarding the browser were made before Netscape was a significant company.

At one point, Schmalensee was shown a government interrogatory, a legal request for written responses to certain questions, sent to Microsoft, which asked the company to identify the date it made its decision to offer its browser for free.

In its response, Microsoft said Chairman and Chief Executive Officer Bill Gates announced the company's decision during his Internet Strategy Day speech on Dec. 7, 1995.

Schmalensee, when asked by Boies about the response, said the Microsoft's answer struck him "as non-responsive" because it didn't answer the question of when the decision was made -- only when Microsoft announced it.

But Schmalensee had earlier said that he believed the decision to give Internet Explorer away without charge was made in late 1994 or early 1995, a point Microsoft tried to back up after court by releasing additional interrogatory answers which corresponded to that view.

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