MS/DOJ: findings highlight rivals' cases
- 11 August, 1999 22:00
In more than 1,000 pages of court papers filed yesterday, both sides in the government’s landmark antitrust trial against Microsoft rehash 15 months worth of evidence, testimony and economics in an attempt to sway the federal judge who will rule whether the company illegally used monopoly power.
The US Department of Justice (DOJ) and 19 state attorneys general argue that the software giant has a "powerful and well-entrenched operating system and monopoly" and "engaged in a broad pattern of unlawful conduct with the purpose and effect of thwarting emerging threats" to that monopoly.
Microsoft fires back that the government, despite winning the public relations war, failed to prove its allegations that the company illegally "tied" a Web browser to its Windows operating system, prevented a rival -- Netscape Communications -- from distributing a competing browser, and hurt consumers through its actions.
The filings, which are each side's "findings of fact," are part of an unusual procedure established by the presiding judge, US District Court Judge Thomas Penfield Jackson, to separate the facts proven at the trial from the conclusions of law. Jackson will use the voluminous briefs to issue his
own findings -- essentially, he will decide which side he agrees with.
That decision, which is expected after the parties return for oral arguments on Sept. 22, may well signal the judge's final ruling in this landmark case, and could also serve as a powerful catalyst for a settlement, said Hillard Sterling, an attorney at Gordon & Glickson PC in Chicago.
"Once he rules on the facts, inevitably he shows his cards on the law," said Sterling. Jackson's purpose in establishing this two-step decision-making process may be "to coerce a settlement by revealing his leanings," he added.
The two legal briefs sum up what each side argued at trial through witnesses, cross-examination and documents such as e-mail and corporate reports. They also show how each side uses some of the same facts to support very different conclusions.
According to Microsoft, the government's own chief economics witness testified that consumers had not been harmed to date, when first asked this question at trial. The witness, Franklin Fisher, an economist at the Massachusetts Institute of Technology, testified differently when he appeared as a rebuttal witness several months later. He said at that time that consumers had been harmed by elimination of choice. Microsoft discounts his testimony as speculation and of no evidentiary value.
The government contends that Microsoft's actions have caused substantial and "far-reaching" consumer harm. "Microsoft's illegal maintenance of its monopoly has already deprived consumers of the potential benefits of greater choice, more innovation, and lower prices for Windows," the government argues.
The government's findings restate the major charges made in opening arguments on Oct. 19 last year. But the findings are very focused and forceful on the issue of consumer harm – an area legal experts have said is among the most difficult to prove. The company, according to the charges, "prevented consumers from getting what they wanted so that Microsoft could keep what it had -- a monopoly in operating systems."
Microsoft's attorneys attempt to turn the spotlight on the rapidly changing marketplace as grounds to debunk the government's claim that Microsoft has such a well-entrenched monopoly on Intel-based PC operating systems that it requires government intervention. The company's strongest argument of fact may be that Netscape -- the Internet browser developer that the government alleges Microsoft tried to squash -- was worth billions of dollars to a Microsoft rival, America Online Inc. AOL announced its purchase of Netscape last November.
When the government filed suit against Microsoft in May 1998, government lawyers argued that they needed immediate action because the market for Web browsing software would "tip" to Microsoft and Netscape would be unable to compete.
During the next 15 months, the Microsoft brief points out, the market has changed. "As AOL recognizes, its ability to replace Internet Explorer with Netscape's new componentized Web browsing software in the proprietary access software for the AOL and CompuServe online services could promptly restore the substantial lead that Netscape’s Web browsing software once enjoyed," Microsoft argues.
In addition, the company says, the rapid rise of Web-based applications that reside on servers and can be run in Web browsing software hosted by a variety of different operating systems shows that Microsoft has no lock on the development of applications. The rise of support for Linux, the open- source operating system being developed by software developers around the world, demonstrates there are no "barriers to entry" in the operating system business. At the same time, the company notes that the PC is being threatened by a range of devices, such as handheld personal digital assistants, television set-top boxes and game machines.
"In short, the world is changing very quickly, and the changes that are taking place are inconsistent with the notion that Microsoft possesses durable monopoly power in a narrowly defined market protected by high entry barriers," the company argues. "That alone is sufficient reason to dismiss plaintiffs’ monopolisation claims."
The DOJ writes of a very different market, one in which Microsoft uses its monopoly Windows operating system, which runs on nearly 90 percent of PCs worldwide, to stymie new and emerging technologies. The government argues that the most prominent of these threats came from competing Internet browsers, particularly the Netscape browser. The browser had the potential of making the underlying operating system essentially unimportant by allowing developers to write applications directly to the browser, the government argues.
By gaining a substantial share of the browser market and weakening rivals, Microsoft "blunted the browser threat to the applications barrier to entry and thereby maintained its operating system monopoly."
Microsoft, the government said, acted quickly to squelch the "evolving middleware threat" posed by Netscape's browser and also attacked other software operating system threats, such as Sun Microsystems Inc.'s Java, Intel Corp.'s Native Signal Processing used in multimedia development, and Apple Computer Inc.'s QuickTime multimedia player.
The government said AOL's acquisition of Netscape "will not undo the harm to competition wrought by Microsoft. ... AOL will neither resurrect the browser threat nor seek to erode the applications barrier to entry in other ways."
The government closes its exhaustive report with a quote from its chief economic witness, MIT's Fisher.
"Microsoft has shown that it will decide the ways in which innovation takes place in this industry, and that any innovation which threatens Microsoft's platform monopoly will be squashed," said Fisher, during testimony last January. "We will live, as it were, in a Microsoft world in which choices are the choices that Microsoft makes. I don't think that's good for consumers, but those effects have only just begun."
The findings are based on based on 76 days of testimony and thousands of pages of evidence. Testimony in the trial concluded June 24.