Tech Industry

Feds: Antitrust trial showed Microsoft abuses

In proposed findings of fact, Microsoft contends that the evidence in the antitrust trial proves its actions benefited consumers.

Microsoft and government attorneys today gave sharply conflicting summaries of 76 days of testimony in their landmark antitrust dispute.

In proposed findings of fact sent to U.S. District Judge Thomas Penfield Jackson, Microsoft argued that the evidence proves its actions benefited consumers, while the government said the software giant thwarted competition so it could hold onto its dominant position in the software market.

Microsoft contended that all of its actions--particularly its melding of a Web browser in the Windows operating system--were completely legal. The Redmond, Washington-based company also said it faces "intense competition" in the space, contrary to government allegations that it is a monopolist.

"Plaintiffs may have succeeded in portraying Microsoft as an aggressive company that occasionally engages in tough tactics, but their burden was much higher," Microsoft's brief argues. "Absent some showing that Microsoft's actions have actually prevented other companies from creating new software products and getting those products into the hands of consumers, the antitrust laws are not implicated."

The Justice Department and 19 states, meanwhile, said that the evidence shows that Microsoft has "engaged in a broad pattern of unlawful conduct with the purpose and effect of thwarting emerging threats" to Windows, which powers nine out of ten Intel-based machines.

Specifically, they said the evidence proves Microsoft proposed dividing markets with three companies, bundled separate products, and cut-off distribution channels for competing products--in violation of antitrust laws--to eliminate threats posed to the dominant operating system.

"Microsoft prevented consumers from getting what they wanted so that Microsoft could keep what it had--a monopoly in operating systems," the government said.

In a suit filed in May 1998, the government alleged that Microsoft was a monopolist that used its dominance to neutralize threats posed by Netscape Communications (now owned by America Online), Sun Microsystems, and other companies. Microsoft has vigorously denied the charges, saying the charges are being leveled by rivals who simply can't compete in the marketplace.

Lawyers for the two sides squared off at a trial that began last October in a Washington courtroom. Testimony wrapped up in June. A final decision is not expected until late this year, or early next year.

Summarizing each sides' version of events in encyclopedic detail over a total of 1,200 pages, the briefs reveal very little that is new. Still, litigators said that the filings--indexing hundreds of thousands of pages of testimony and exhibits--could make or break the government's case.

"There is no more important document in an antitrust case than the proposed finding of fact," said Stephen Axinn, an antitrust attorney at Axinn, Veltrop & Harkrider in New York City. "For the first time, the press and the court is being presented in an organized fashion, saying 'This is what we proved for each offense of the case.'"

Added Hillard Sterling, an antitrust litigator at Gordon & Glickson: "Once Judge Jackson selects his favorite facts, his decision is a done deal."

Microsoft contended that the evidence, often uncontested by the government at trial, proves, among other things, that:

• The integration of the Internet Explorer browser into Windows has provided many consumer benefits. This is important in light of a federal appeals ruling last June that said Microsoft was free to combine the two so long as there was "plausible benefit."

• Distribution channels for Netscape and other alleged victims in the suit were never foreclosed, a necessary element to any antitrust case.

• Microsoft faces competition from a host of rivals and does not control prices in the market--two factors the contradict government claims that the company is a monopolist.

The government brief, meanwhile, said the evidence established that:

•  Microsoft tried to prop up its alleged monopoly by proposing market divisions with Netscape, Apple Computer, and Intel, all in violation of the law.

•  Microsoft punished partners that used products that competed with Windows and rewarded those who excluded them, actions that seriously foreclosed distribution channels of Netscape and other competitors.

• In the future there is a strong likelihood Microsoft will dominate Internet software the same way it dominates operating systems now.

The two sides are scheduled to face off in court on September 21. The parties are expected to file revised findings before Jackson issues the final findings at an unspecified date. Once in place, the findings will form the factual basis for an ultimate decision in the case.