Article 73 of 200
Microsoft future in limbo
Judge rules software giant a monopoly, calls it harmful and sets th e
stage for possible breakup
San Francisco Examiner
Friday's ruling by a federal district judge that Microsoft is a
"harmful" monopoly could be the historic first step in the
dismantling of a software empire headed by Bill Gates, the world's
In a long-awaited finding of fact after a yearlong federal
antitrust trial, Judge Thomas Penfield Jackson declared that the
Redmond, Wash., high-tech giant dominated the software market at the
cost of inhibiting innovation and harming consumers.
Jackson's finding sets the stage for the next phase in the case:
He now has to rule whether Microsoft gained and maintained its
monopoly through illegal means. If the judge decides Microsoft broke
the law, the judge will have to decide on a sanction, which could
involve breaking up the high-tech behemoth.
"Microsoft enjoys so much power in the market for Intel-
compatible PC operating systems that if it wished to exercise this
power solely in terms of price, it could charge a price for Windows
substantially above that which could be charged in a competitive
market," Jackson wrote in his 207-page opinion. "Moreover, it could
do so for a significant period of time without losing an unacceptable
amount of business to competitors."
"In other words,' Jackson said, "Microsoft enjoys monopoly power
in the relevant market."
The finding was met with guarded criticism by Microsoft officials
and praise from the company's rivals in Silicon Valley.
Gates, Microsoft's chairman and chief executive officer, said at a
news conference after the ruling that he remained hopeful the case
could be settled out of court.
"We remain committed to resolving these issues in a fair and
responsible manner as quickly as possible," Gates said. "In this
industry, no company has a guaranteed position.
"We compete vigorously but fairly," he added.
Jim Barksdale, the former CEO of Netscape, one of Microsoft's many
high-tech rivals, issued a statement praising the judge's ruling,
saying it was a "tremendous victory for consumers and the high-tech
Jackson's decision goes beyond the factual determination of the
monopoly status of Microsoft. It clearly criticizes the company for
its conduct as a computer software market bully.
"Most harmful of all is the message that Microsoft's actions have
conveyed to every enterprise with the potential to innovate in the
computer industry," the judge wrote. "Through its conduct toward
Netscape, IBM, Compaq, Intel and others, Microsoft has demonstrated
that it will use its prodigious market power and immense profits to
harm any firm that insists on pursuing initiatives that could
intensify competition against one of Microsoft's core products."
Jackson also criticized Microsoft's past business practices.
"Microsoft's past success in hurting such companies and stifling
innovation deters investment in technologies and businesses that
exhibit the potential to threaten Microsoft," the judge said. "The
ultimate result is that some innovations that would truly benefit
consumers never occur for the sole reason that they do not coincide
with Microsoft's self-interest."
Being a monopoly is not an illegal act. Corporations are allowed
to gain a monopoly position by creating a better product or through
good timing or simple luck.
But a company breaks antitrust laws when it uses its market
dominance to continue that monopoly or extend its grip on other
Assistant Attorney General Joel I. Klein, who has been overseeing
the government's case, said, "This is a tremendous victory for
America's consumers . . . (that) shows once again that in America no
person and no company is above the law."
"Silicon Valley is cautiously cheering," said California Attorney
General William Lockyer, who brought the state into the antitrust
lawsuit against Microsoft. Nineteen states, including California, are
party to the government's lawsuit.
Lockyer, who was criticized by some for joining the antitrust
suit, said the findings helped vindicated California's participation.
"So many businesses were impacted, so many competitive
opportunities were smothered, it was an easy decision," Lockyer said
at a press conference following the decision.
Jackson's decision is based on a mountain of documents, taped
depositions and 76 days of the trial testimony, which began Oct. 19,
1998, after almost eight years of investigations, court orders,
subpoenas and other maneuvers between the government and the giant
Attorneys for the U.S. Justice Department and the states charged
that Microsoft pressured computer makers to bundle its Internet
Explorer Web browsing software with its dominant Windows operating
system, squashing Mountain View-based Netscape Communications' own
Navigator Internet Web browser.
A browser is software that allows a computer user to view and
navigate the World Wide Web.
The government also contended that Microsoft in 1995 made an
illegal offer to Netscape to split the emerging Web browser market
and that Microsoft paid computer makers to leave Netscape off their
Microsoft's attorneys countered that it had simply played hard -
but fair - in the rough-and-tumble high-tech marketplace.
Microsoft also returned Netscape's fire, charging that Netscape's
top executives were making up the charges to goad the government into
filing antitrust charges against a business rival.
Friday's findings are the beginning of another long chapter in
this corporate struggle.
Both sides will now spend months preparing for hearings before
Jackson to determine whether the findings constitute a violation of
antitrust laws. Microsoft can also appeal the findings of fact before
Jackson decides on the company's possible antitrust violations.
Legal experts said the decision is a broadside against the
"It was the harshest decision Microsoft could have expected,"
said Nicholas Economides , a New York University professor of
economics who has been following the case closely. "The judge ruled
in every way against the company."
According to Economides , Jackson will also have to determine what
action the government will take against the company. The
possibilities range from tinkering with its contracts with outside
vendors to breaking the company into smaller parts.
"Now that the judge has determined that Microsoft acted in such a
way, he'll have to figure out what to do about it," said Economides .
"That will now be the focus of this case."