A leading economist on antitrust issues will testify for the US government that Microsoft has monopoly power with the Windows operating system and that its integration of a browser into Windows amounts to a “predatory anti-competitive act,” - says Microsoft .
The company, which has been on trial for allegedly illegal corporate behavior since October, issued a statement late yesterday rebutting the written testimony of the US Justice Department's next witness Franklin Fisher, an economist at the Massachusetts Institute of Technology.
Fisher will be the next witness called to testify by the government. He is expected to take the stand today. In order to expedite the trial, the judge in the case has asked that witnesses testify in writing and appear in court for cross-examination. The Justice Department has been releasing the testimony of witnesses on the evening before they are called, but the department had not released Fisher's testimony by late today. No one at the agency would confirm that the testimony Microsoft complained about will be the testimony it presents at trial.
But Microsoft issued a seven-page rebuttal to Fisher's testimony that lays out some of the antitrust expert's arguments in testifying against Microsoft. Fisher served as the chief economic witness for IBM during its lengthy antitrust battle in the 1980s. In his book “Folded, Spindled, and Mutilated: Economic Analysis and U.S. vs. IBM” (written with John J. McGowan and Joen E. Greenwood; 1983), Fisher wrote that competitiveness of any market “is demonstrated by evidence that competitors must react to each other's actions and to users’ demands and must keep pace with technological change.”
The Microsoft statement alleges that Fisher's prepared testimony is at odds with his previous writings on antitrust and with “the realities of America's competitive and dynamic software industry.” “Not since Judge Robert Bork, who abandoned his long-held views on antitrust when hired last year by Netscape (Communications), has the world of antitrust law and economics seen a more dramatic ideological reversal,” the Microsoft statement alleges. “Professor Fisher's testimony would give readers of his 1983 book whiplash.”
Aside from the colorful language, the Microsoft statement sheds light on what Fisher is expected to say about the corporate practices that have been described in court by officials of other companies, including many competitors, during the past few months. Fisher, as an expert witness, is expected to wrap up the testimony of the government's other witnesses, the sometimes damning electronic mails, and deposition testimony from Microsoft officials in order to help pull together the government's case.
Fisher is expected to bolster the testimony of another expert witness, Frederick Warren-Boulton, that Microsoft “possesses monopoly power” in the operating systems market. But Microsoft contends that market share alone does not indicate a monopoly and points out that the company can not charge a monopoly price because it faces competition from rival operating systems, potential new market entrants and pirated software.
Fisher labels as a “predatory anti-competitive act” Microsoft's decision to integrate free Web browsing technology into Windows 98, noting that the move would not otherwise be profitable without its effect of knocking out competition. Microsoft contends the integration was a product design decision that offers technological benefits to consumers.
In addition, Fisher testifies that another “anti-competitive” behavior is Microsoft's requirement of PC manufacturers to display the Windows desktop screen the very first time a new PC running the operating system is turned on. Microsoft contends it gives users and manufacturers great flexibility to customize the Windows desktop screen.
Fisher goes further in claiming that Microsoft engaged in anti-competitive behavior regarding the spread of Sun Microsystems' cross-platform Java programming technology, indicating the actions “restrain the use and availability of Java technology,” according to the Microsoft statement.
“Professor Fisher seems unfamiliar with the concept of supply and demand,” the Microsoft statement says. “Microsoft's Java strategy is based on offering software developers what they have asked for -- a choice of writing cross-platform Java programs or of writing programs in Java that exploit the features of the Windows platform.”
Recently, a federal judge in San Jose, California, ruled that Microsoft violated its licensing contract with Sun by altering its version of Java, to maximise its performance with Windows. Microsoft is appealing that decision.
(Wasserman is the Washington bureau chief for The Industry Standard.)