Article 29 of 54
Microsoft, DOJ Lawyers Debate At University Conference
By Marcelo Prince
Dow Jones News Service
(Copyright (c) 2000, Dow Jones & Company, Inc.)
NEW YORK -(Dow Jones)- Participants in the landmark Microsoft Corp.
(MSFT) antitrust trial squared off Friday in a one-day conference that
revealed just how far apart the two camps remain.
The New York University conference featured Doug Melamed, one of the
Justice Department's antitrust attorneys who argued the case; Charles
"Rick" Rule, one of Microsoft's legal advisers; and C. Boyden Gray, a
former Republican White House counsel and Microsoft sympathizer. David
Boies, the prominent attorney the Justice Department brought in to lead
its case, had been slated to attend but canceled without explanation.
After detailing his support for the rulings of Judge Thomas Penfield
Jackson, who oversaw the case, Melamed said it would have been a
"radical departure" to find Microsoft not in violation of federal
antitrust laws. Melamed focused his presentation on Penfield's
conclusions of law and finding of facts. He declined to comment on the
government's remedy proposal filed a week ago that called for the
breakup of the software giant into two companies, one selling the
Windows operating system and the other consisting of its office suite
and Internet assets. When asked if a drawn-out legal process might make
any remedy obsolete, Melamed later said, "as we said in our brief,
remedies are forward-looking and you have to think in those terms."
Not surprisingly, Rule rebutted Melamed's comments and defended
Microsoft's actions, saying it would appeal the case and would likely
win. "The courts will conclude correctly that Microsoft has not violated
antitrust law because it hasn't harmed consumer welfare," he said. He
argued that the government's breakup proposal departs from the original
complaint and trial facts, which focused on Microsoft's Internet
Explorer, and "exposes the entire weakness of the government's case."
"It's remedial in the same way Rome's approach to Carthage was
remedial," he added.
Rule would not comment on Microsoft's response slated for May 10 but
admitted it will be in the awkward position of having to propose a
remedy for violations the company claims it never committed. "It's
important to bring the case back to reality (because) the government's
remedy is so extreme and out of proportion," he said.
Gray, who joked that an old-fashioned duel might be the best solution,
said the government "bears a heavy burden of justification" to regulate
with the marketplace. He also noted that the court case deals
exclusively with the browser war, Microsoft's efforts to promote its
Internet Explorer against Netscape's Navigator, and thus doesn't support
the proposed breakup. Gray, who has issued a brief on behalf of a
software association defending Microsoft, said the proposed breakup
would have a chilling effect on the PC software business and slowly
bring software development "to a grinding halt."
Echoing comment's made by Microsoft Chairman Bill Gates last week,
Rule said the government's proposal reveals its "ignorance of how
Microsoft operates." He said the government arbitrarily decided which
applications are not part of the operating system and would give
Microsoft only four months to split itself up. He said it took the
government two years to complete AT&T Corp.'s (T) reorganization when
the telephone monopoly was broken up. He also said it would be unlikely
for the Supreme Court to hear the case on an expedited track, saying it
would likely first go through the Court of Appeals. But he says
Microsoft remains committed to a quick resolution.
The three panelists did agree, however, that it is not clear whether a
Republican administration would have brought an antitrust suit against
Microsoft. "It's possible they wouldn't have brought it, (but) this case
is perfectly consistent" with antitrust law and precedence, Melamed
said. Rule, a former Justice Department antitrust enforcer, said
Microsoft isn't looking for a change in the White House in November for
help. "It's looking at the courts - it doesn't need political
intervention to win," he said.
The sparring among the lawyers involved in the Microsoft case at
Friday's conference was followed by a panel of economists who discussed
the proposed breakup remedy.
Three of the four panelists viewed the breakup as both inconsistent
and ineffectual. The dissenter was Daniel Rubinfeld, a professor at
University of California, Berkeley, and former Justice Department
antitrust attorney. He argued that the proposed remedy is "relatively
simple and non-intrusive" because it doesn't place restrictions on any
of the business lines. He added that the interim conduct restrictions
"help to achieve some of the judge's findings."
Nicholas Economides , a professor at New York University, argued that a
breakup would result in higher prices and the government failed to show
that conduct remedies wouldn't work. He also predicted that Microsoft
would settle the case before the appeals court rules and end up with up
legal fees and treble damages of "$6 billion or so."
Robert Gertner, a professor at the University of Chicago, said it's
not clear the proposed split would solve the problems raised by the
case. Gertner also said it would be difficult to draft a remedy that
anticipates future threats Microsoft could make in areas like handheld
devices and servers. He suggested a fine of "many billions of dollars"
might be more successful in deterring future anticompetitive behavior
than the breakup.
Microsoft spokesman Mark Murray declined to comment on the economists'
remarks about possible fines or damages. "I don't comment on that kind
of speculation," he said. "We do believe that this lawsuit could have a
chilling effect on innovation and the American high-tech economy."
Asked about the 131 civil suits filed against Microsoft, Murray said
the company expects to "refute the allegations that these class-action
lawyers have brought."
"The irony of all these cases is that Microsoft actually charges far
less for Windows than virtually all operating system competitors," he
Murray said the company is still willing to settle the case and
remains "open to further discussions if there was reason to believe they
could be fruitful."
Stanley Liebowitz, a professor at the University of Texas who
submitted a brief on Microsoft's behalf, called the breakup plan
"flawed" and "bonehead(ed)." He argued it would hurt consumers by merely
helping Microsoft's competitors like Oracle Corp. (ORCL) and Sun
Microsystems Inc. (SUNW) and reducing competition.
-Marcelo Prince; Dow Jones Newswires; 201-938-5244