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MSFT trial ends, for now
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June 24, 1999: 6:09 p.m. ET
Government likely to emerge victorious from landmark antitrust suit
By Staff Writer John Frederick Moore
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NEW YORK (CNNfn) - After 21 weeks of courtroom proceedings, 26 witnesses and enough public relations spin to make a White House press secretary jealous, the trial phase of the Microsoft Corp. antitrust case came to a close Thursday with the government apparently in position for a victory.
It's been more than a year since the Justice Department and a contingent of 20 (now 19) state attorneys general sued Microsoft (MSFT) for broad antitrust violations.
Antitrust experts say the government has held a commanding lead ever since the trial's first day, when - during videotaped testimony played in court - Microsoft Chief Executive Bill Gates came off as duplicitous as Bill Clinton and about as personable as a wet sponge.
Credibility issues aside, legal scholars believe the government - and by the government they mean lead Justice Department attorney David Boies - has outmaneuvered Microsoft's high-priced legal team practically every step of the way, and that the software firm had better brace itself for what is sure to be a government victory handed down from U.S. District Judge Thomas Penfield Jackson.
But that decision isn't likely to arrive until sometime this fall. First, the two sides will have about a month to prepare legal briefs and present final oral arguments.
Click here to see a chronology of the trial
Then, probably sometime after Labor Day, Jackson will issue his findings of fact, which antitrust scholars believe will lead to another round of settlement talks because each side will know which way Jackson is leaning.
After that, Jackson will issue his decision.
Likely remedies
Trial watchers agree that Jackson isn't likely to do anything drastic, such as breaking up Microsoft into separate companies - creating a family of "Baby Bills," so to speak - noting that the judge's remedies are more likely to target specific anticompetitive conduct.
"He'll probably hand down a series of injunctions to stop the specific things he finds to be illegal," said Spencer Waller, a professor at Brooklyn Law School.
Despite the lengthy antitrust trial, Microsoft shares have thrived
Assistant U.S. Attorney General Joel Klein declined on Thursday to say what remedies the government may seek if it wins the case.
"It's a serious problem and it merits a serious solution," he told reporters outside the courthouse.
William Kovacic, professor at George Washington University Law School, said Jackson will probably prohibit Microsoft from making exclusive deals with computer makers and Internet service providers, giving them more freedom to make deals with Microsoft's competitors.
Kovacic noted that IBM (IBM) executive Garry Norris' testimony proved most valuable in determining what remedies would be most appropriate in the event of a government victory.
Norris, who frequently negotiated with Microsoft regarding use of its Windows operating system in IBM PCs, testified that Microsoft wanted to charge his company a higher fee for each copy of Windows 95 than it did such favored firms as Compaq Computer Corp. (CPQ).
The issue, Norris said, revolved around IBM wanting to include software that competed with Microsoft's, including IBM's own OS/2 operating system.
"Norris, more than anyone else, showed how difference in royalty terms reinforced Microsoft's control over equipment suppliers," Kovacic said.
Fierce competitor or ruthless monopoly?
Microsoft has argued all along that its behavior was one of a fierce competitor, not that of a raging bull of a monopolist, ready to trample over any competitive threat that stood in its path. Judge Jackson, by most accounts, isn't going to buy that argument.
"The government is likely to prevail on the cumulative effect of how Microsoft's market power has prevented competition," Waller said. "A company that didn't have Microsoft's power could say they were just trying to be competitive."
Click here to see Microsoft trial statistics
Microsoft proponents, however, haven't been swayed by popular opinion. Rick Rule, an attorney at the Washington firm of Covington & Burling, and an advisor to Microsoft's legal team, argues the government hasn't been able to prove both harm to competition and consumers.
"Once the courts go through the record carefully, no matter what people say about Boies' courtroom capabilities, I don't think the government carried its burden," Rule said.
Future shock
Among its many rallying cries against the government's case, Microsoft has argued the pace of change in the computer industry renders such terms as "monopoly" useless. The company maintains that while it currently holds the dominant position in the operating systems market, that status is tenuous at best because of the rapid influx of new technologies.
Indeed, many trial watchers have noted that by the time the case makes its way through the appeals process - and appeals there will be - the computer industry may not look the same as it does today.
Microsoft is already gearing up for the future, making investments in cable companies - most notably, a $5 billion stake in AT&T Corp. (T) - and telecommunications firms to develop computer technologies for devices other than PCs.
"This company is supremely adaptable," Kovacic said. "They're buying their way into the cable business and technological alternatives. The government's fear is that Microsoft will get off the existing platform [Windows-based computers] and on another. The government is confident that this company did something wrong, but they're not confident of what to do about it."
Antitrust scholars believe the case is almost certain to make its way to the Supreme Court. It'll be a long trip, however, with the case arriving at the high court sometime around fall 2002 under the best-case scenario.
By then, the face of the computer industry will have morphed into another look.
"This is the government's and Jackson's dilemma," Kovacic said. "No serious remedy will be put into place until the appeals process is finished. It's like someone knowing he's sick, but he gets a prescription that can't be filled for three years."
Waller, however, pointed out that a large part of the government's case rested with the argument that Microsoft took steps to extend its monopoly into other areas, such as Internet technologies. That notion may prove to be the key to any charges holding up on appeal, and on remedies that will have meaning beyond next month.
"This case is forward-looking enough, dealing with the Internet and other technologies, that the outcome won't be useless once it's all over," Waller said.
The lawsuit and the damage done
Although Microsoft's defense team may have done little to put the company in line for a courtroom victory, it has, Kovacic said, made it harder for Jackson to impose any sweeping remedies against the firm.
"Microsoft has planted the seeds of doubt about whether its competitors are truly vulnerable and generally frail," he said. "They've shown that their competitors are able to fend for themselves."
Kovacic's comments ring especially true in light of America Online Inc. 's (AOL) $10.1 billion acquisition of Netscape Communications Corp. - a deal that Microsoft has argued renders the government's case irrelevant.
In a sense, Kovacic said, the AOL-Netscape deal symbolizes how the case was over before it started.
"Microsoft has already changed its behavior," Kovacic said. "They've backed off some of the contested practices. Their competitors have been emboldened to do things they may not have done before the trial. The government has gotten a lot of what they wanted. The company is not swinging away like they used to."
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