MS/DOJ: Angry words from both sides

The US government will wrap up presenting its case against Microsoft today -- but not before it releases another segment of the videotaped deposition of Microsoft CEO Bill Gates. The government will enter an hour of tape into evidence along with a 'huge' number of other Microsoft documents it wants on the record. The tape segment won't be shown in court, but a transcript will be released. In and out of the courtroom yesterday the US government worked to summarise its antitrust case against Microsoft. But it was outside the courtroom where some of the angriest words were spoken.

The US government will wrap up presenting its case against Microsoft today -- but not before it releases another segment of the videotaped deposition of Microsoft CEO Bill Gates.

The government will enter the tape -- about an hour in length -- into evidence along with a "huge" number of other Microsoft documents it wants entered into the record. The tape segment won't be shown in court, but a transcript will be released.

In and out of the courtroom yestyerday the US government worked to summarise its antitrust case against Microsoft. But it was outside the courtroom where some of the angriest words were spoken.

The government in this case has "introduced compelling evidence" showing a widespread pattern of anticompetitive behavior on Microsoft's part "designed to crush any threat to its operating system," said Joel Klein, assistant attorney general at the US Department of Justice (DOJ).

Klein said that between the internal Microsoft e-mails, expert testimony and other material, the government has introduced in this case "an extraordinary mountain, mountain of evidence that this company did not compete on the merits."

But William Neukom, Microsoft's chief corporate attorney, called the government's case "feeble" and said the DOJ has "decided to do the bidding of competitors" to Microsoft.

The government has relied on out-of-context snippets of e-mail to build its arguments, he added. With Microsoft's turn, "this case is going to change to facts and fair analysis," Neukom said.

Inside the courtroom, lead government attorney David Boies took economist Franklin Fisher, the last government witness, through a series of questions designed to sum up some of the government's strongest arguments against the software giant.

Fisher will return to the witness stand next Tuesday, where he will face some more questions from Microsoft attorney Michael Lacovara, who began his re-cross examination late Monday.

Microsoft's first witness in the case, Richard Schmalensee, an economist at the Massachusetts Institute of Technology (MIT), is expected to take the witness stand next Tuesday.

Fisher again focused on the price of the operating system -- a topic discussed largely behind closed doors Monday in court -- and said that Microsoft doesn't have to necessarily charge the highest possible prices to have monopoly power.

To assume that the company will not always use its power to raise prices "is to rely on the benevolence of the monopolist" rather than on other market constraints on pricing, said Fisher.

Microsoft is also taking its profits in ways that are not reflected in the pricing of its operating system, he said. When it sells an operating system, Microsoft can also expect to earn profits from the sale of complementary products, or in the protection it gets from OEMs (original equipment manufacturers) through exclusive contracts, said Fisher. OEMs pay about US$50 on average for each copy of an operating system, but Microsoft also has a "pretty good assurance" that it will also sell its Office application suite along with the operating system, Fisher added.

Microsoft's ability to control what goes on with OEMs extends to hardware agreements, according to Fisher. But when he started to give details of those agreements Microsoft attorney Lacovara objected and said discussion of the hardware agreements was sealed. Judge Thomas Penfield Jackson put off discussion on that subject, but left open the possibility that it might be discussed later.

Fisher also said Microsoft's decision to give away its browser may appear to have consumer benefit, but "it's what happens apart from that campaign that one has worry about.

"Once the browser threat is gone," Microsoft may be able to stop giving the browser away from free, Fisher said.

But consumers have not been hurt -- up to a point -- by Microsoft's actions, he said.

Microsoft has used its power to protect itself from threats that may or may not materialise, a move that has hurt consumer choice, Fisher said.

In the area of PCs "it won't be a consumer-driven society -- it will be a Microsoft-driven society," he said.

(Patrick Thibodeau is a senior writer at Computerworld.)

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