DOJ's Klein in antitrust hot seat

Joel Klein is comfortable arguing all manner of controversial law. Sexual discrimination, the rights of the disabled, medical malpractice, and attorney misconduct have all found their way into his legal briefs at one time or another during his decades of litigation.

But last week, only three months after being named head of the Justice Department's antitrust division, Klein found himself prosecuting the highest-profile case of his 20-year career when he accused Microsoft of violating a 1995 antitrust settlement.

In some ways, Klein acknowledges that the case is a test of the viability of antitrust doctrine itself in an age when business and technology move so quickly that government regulation sometimes seems arcane and obsolete.

"History will show that this is a role that is as important now as it was 100 years ago when the Sherman Act was passed," said Klein, a man not normally given to the trademark hyperbole of his profession.

The 51-year-old Klein seems the antithesis of the highly charged worlds of Washington and Silicon Valley that he is straddling with this case. In an interview yesterday with CNET's NEWS.COM, he spoke softly and deliberately, bearing a gentle manner more befitting of academia than the bare-fisted arenas of politics and high technology.

Associates describe Klein as intelligent, cautious, and extremely thorough. One attorney who has worked extensively with Klein said his experience formulating bite-sized, comprehensible arguments will serve him well in his current challenge, which inevitably will produce mountains of evidence that could lead off in countless directions.

"He works extremely hard to find the simple core of a case and keep everything focused on that simple core, rather than building up a mass of facts that somehow, when conglomerated, seem to amount to something," said the attorney, who asked not to be named. "[Klein's feeling is] if you can't say it in two or three sentences, you haven't figured it out yet."

Those qualities, combined with his reputation for copious research, will serve him well as he prepares to do battle with the Redmond empire.

According to many who are familiar with his work, Klein is the perfect candidate to navigate the law around the particulars of the software industry. They explain that his experience arguing 11 cases before the Supreme Court--which generally takes cases only when the law is out of step with the times--makes him a formidable opponent in court and has trained him in how to redirect laws that have reached a crossroads.

In order to succeed, Klein will have to prove that additions Microsoft is making to its Windows 95 operating system violate the terms of a consent decree the software giant and federal government signed in 1995. Government critics argue that the case will be an uphill battle for Klein because it demonstrates just how anachronistic--and potentially dangerous--antitrust laws have become when applied to an industry that wasn't even contemplated when most of the statutes were written.

"Doctrinal issues really require one to be able to rise above the trees, clearly see the forest, and deal with issues," said Steve Smith an attorney specializing in antitrust law at Morrison & Foerster in Washington, D.C. "Somebody who has spent the largest proportion of their career dealing with issues at that level is well-suited to lead the antitrust division in terms of thinking about how, if at all, antitrust doctrine needs to be modified to account for these changes."

Klein agreed that antitrust law needs to adapt to the rapidly evolving high-tech industry, but adds that the doctrine is a lot like constitutional law because its broadly worded nature allows it to constantly adjust to changing circumstances. For enforcement to keep up with software and computers, he said, it needs to "look at the relationship between antitrust law and intellectual property law, which is a key part of the high-tech area."

And to Klein, the doctrine is abundantly clear in the Microsoft consent decree.

"Under the current scenario, all original equipment manufacturers which use Windows 95 have to put Internet Explorer on it," Klein said. If these PC manufacturers are freed of these licensing restrictions, he added, "consumers benefit by the fact that OEMs can choose whatever browser they want."

"The deterrent to innovation increases" with market dominance, he said. "And that, in the end, will undermine consumer interest."

Besides being widely regarded as an excellent litigator, Klein wins points for being able to work with both Republicans and Democrats. While deputy White House counsel from 1993 to 1995, Klein helped push through two Supreme Court nominations that faced opposition in the Senate. His moderate-to-conservative stance on antitrust law--evidenced most recently by his approval of the $23 billion merger between Bell Atlantic and Nynex in April--has curried favor with Republicans.

But his caution in enforcing antitrust laws is a double-edged sword. Some of the strongest opposition leveled at Klein to date has come from Democrats who complained he was not aggressive enough when it came to policing large corporations. Led by critics such as Sen. Ernest Hollings (D-South Carolina), Democrats blocked Klein's nomination this summer. The nomination finally went through in July, but only after a special procedural vote was called and Republican senators such as Utah's Orrin Hatch put their support behind Klein.

Now that Klein has filed his contempt motion against Microsoft, criticism that he is too lenient appears to have been hushed--at least for the time being.

"Everybody knew he was smart enough," said Gary Reback, an antitrust attorney and Microsoft critic at Wilson, Sonsini, Goodrich, & Rosati in Palo Alto, California. "The question was whether he was tough enough, and he answered that. He's taken a very bold step and he deserves a lot of respect for that."

Although Klein was confirmed to his current position as assistant attorney general only recently, he was no stranger to the office. He was appointed to a high-ranking post in the division in 1995, and in October of 1996 he became acting head of the division after his predecessor, Anne Bingaman, resigned.

Klein said his goal in enforcing the consent decree is not to benefit Microsoft's competitors, but to provide consumers with more choices.

"I don't know whether it's Microsoft, Netscape, or anyone else who has the better product," Klein said. "What we're trying to make sure is that people who are thinking about entering the market and thinking about spending [research and development] dollars will believe that they have a fair competitive shot."

To be sure, Klein's most recent action is not scoring points with everyone. Opponents have argued that Attorney General Janet Reno leveled the very public allegations against Microsoft in an attempt to deflect criticism directed at her handling of probes into alleged campaign abuses at the White House. They further complain that the case raises troubling questions about just how far the government should go in meddling into the software industry or, for that matter, into the free-enterprise system altogether.

"Here is the DOJ trying to micromanage the kind of software that can or can't be sold," said Tom W. Bell, a policy analyst at the Cato Institute, whose headquarters are a short walk from the Supreme Court. "This is the DOJ getting involved in an area where even Bill Gates makes the wrong decisions sometimes. That's a very troubling precedent."

For its part, Microsoft seems to have anticipated the Justice Department's move since the time it began negotiating the consent decree in 1994. Based on a brief it filed in response to the allegations, Microsoft appears prepared to offer ample evidence showing that its bundling of IE 4.0 with Windows 95 is entirely in keeping with the letter of the decree. A number of antitrust attorneys say the government's case in proving that IE and Windows are distinct products is anything but airtight.

But supporters say Klein, the quintessential legal strategist, would not have taken the action unless he was convinced that he will win. "Obviously, his decision to go after Microsoft was a high-priority one," said Christopher Cerf, who has worked with Klein since 1986, first in private practice and later in the White House. "I can guarantee you it was not done without a lot of thought."

Key antitrust cases in Klein's career
Oct 1997	Klein asks a federal court to hold Microsoft in civil contempt for violating terms of a 1995 court order barring it from imposing anticompetitive licensing terms on manufacturers of personal computers Klein reaches an agreement with Raytheon, a manufacturer of aircraft and defense electronic equipment, that allows the company to go forward with its $5.1 billion acquisition of General Motors' Hughes Aircraft subsidiary, but only if Raytheon sells two critical defense electronics businesses and sets up firewalls to prevent competition on an upcoming bid for a new missile
April 1997	Klein is sharply criticized for failing to take any action to block the merger of Nynex and Bell Atlantic and for declining to impose conditions on the deal
Oct 1996	As acting assistant attorney general, Klein presides over the largest criminal antitrust fine ever--Archer Daniels Midland is fined $100 million for its role in two international conspiracies to fix prices, eliminate competition, and allocate sales in food additive markets worldwide
Aug 1996	As principal deputy of Justice's antitrust division, Klein files an antitrust suit against General Electric, charging that the company illegally prevented hospitals using GE's medical imaging repair software from servicing medical equipment at other hospitals; GE is charged with using its restrictive licensing agreements to block competition, and with obtaining the agreements as a condition of granting hospitals licensing to use certain GE software