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 added.

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


Copyright © 2000 Dow Jones & Company, Inc. All Rights Reserved.