On Appeal Microsoft Ruling Has Cracks,
Experts Say
By Darryl K. Taft Computer Reseller News
Washington, D.C.
10:54 AM EST Tues., Apr. 04, 2000
Despite the government's sweeping victory in the case
against Microsoft Corp., some legal experts say
Microsoft's chances on appeal look positive.
"This decision has both predicted and surprising
elements," said Hillard Sterling, an antitrust attorney
and partner at the Chicago law firm of Gordon &
Glickson who has closely observed the trial. Sterling
said portions of Jackson's legal opinion could actually
benefit Microsoft on appeal.
Jackson found that Microsoft violated sections 1 and 2
of the Sherman Antitrust Act by illegally maintaining its
monopoly in the PC operating system market and
attempting to monopolize the market for Internet
browsers.
Jackson agreed with 23 of the 26 legal arguments made
by the U.S. Department of Justice and the 19 states
involved in the case.
However, Jackson rejected the government's claim that Microsoft's exclusive deals with
OEMs, ISPs and others prevented Netscape Communications Corp., now part of
America Online Inc., from having access to the market. The deals did not foreclose
Netscape from the market, Jackson ruled.
"The facts do not support the conclusion that Microsoft's marketing arrangements with
other companies constituted unlawful exclusive dealing," Jackson wrote in his opinion.
This "shocking concession may compromise his ruling," Sterling said. "That Netscape
was not precluded from any real access to important distribution channels presents a
severe crack in the foundation of his ruling. Without anticompetitive effect, there is just
not a basis for finding antitrust illegality."
This portion of Jackson's ruling could "help somewhat" in Microsoft's preparation for
appeal, said William Kovacic, an antitrust expert and law professor at the George
Washington University.
The company said it would seek an expedited appeal.
"I think that it indirectly highlights one of several issues that will receive attention on
appeal," Kovacic said. "You could say the same about the treatment of the tying
allegation," in which Jackson refuted the U.S. Court of Appeals ruling in which they
overturned his opinion that Microsoft illegally tied its browser to its operating system,
Kovacic said. "Those two areas will be a basis for dispute."
Microsoft's chances on appeal are uncertain but possibly more positive than not
because "in many respects, where the judge had to make judgment calls, other judges in
the [Washington], D.C., circuit and on the court of appeals would probably make
different calls," Kovacic said.
"The finding has irreconcilable tensions," Sterling said. "Judge Jackson finds
exclusionary conduct but admits the absence of anticompetitive effects. The issue is
whether competitors have alternative viable ways to sell their products."
Not only does Jackson "recognize the absence of these barriers, in particular, he found
that there are 'alternative channels of distribution' available to Netscape--which was the
central focus of the case," Sterling said. "Netscape was supposed to be a prime example
of a foreclosed competitor."
U.S. Assistant Attorney General Joel Klein dismissed the claim that the judge's findings
did not represent a slam-dunk for the government's case. "It is a very strong opinion in
the critical areas of monopolization," he said.
"We believe we have strong grounds for an appeal based on this ruling," said Bill
Neukom, executive vice president for law and corporate affairs at Microsoft. "As the
Appeals Court already has ruled, it is a mistake for government regulators or the courts
to try to design high-technology products. Government regulation of software product
design would surely slow innovation and harm consumers," he said.
"While we did everything we could to settle this case, and will continue to look for new
opportunities to resolve it without further litigation, we believe we have a strong case
on appeal," said Microsoft Chairman and Chief Software Architect Bill Gates. "The
Appeals Court already has affirmed Microsoft's right to build Internet capabilities into
the Windows operating system to benefit consumers."
Judge Jackson employed some harsh language in his finding. "In essence, Microsoft
mounted a deliberate assault upon entrepreneurial efforts that, left to rise or fall on their
own merits, could well have enabled the introduction of competition into the market for
Intel-compatible PC operating systems," he wrote.
Yet "while the evidence does not prove that they would have succeeded absent
Microsoft's actions, it does reveal that Microsoft placed an oppressive thumb on the
scale of competitive fortune, thereby effectively guaranteeing its continued dominance
in the relevant market," Jackson ruled." More broadly, Microsoft's actions trammeled
the competitive process."
Former Microsoft channel executive Sam Jadallah, now managing director at Internet
Capital Group, Wayne, Pa., said "Microsoft was willing to accept quite a bit to get this
lawsuit behind them and change to their contracts and licensing, but the fundamental
ability to improve products and add features is not something that can be regulated by
the government. Lawyers don't make the best designers of software."
Attorney General Janet Reno welcomed the court's findings. "We are pleased that the
court agreed with the [Justice] Department that Microsoft abused its monopoly power,
that it violated the antitrust laws, that it harmed consumers," she said. "Microsoft has
been held accountable for its illegal conduct by a court of law."CRN
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