Thread----Microsoft Corp.
Dow Jones Newswires -- June 11, 1999
DJ IBM Exec Lights Up Microsoft Trial, But No Knockout
Blow
By Mark Boslet
WASHINGTON (Dow Jones)--The riveting testimony of an International Business Machines Corp.
(IBM) executive this week added muscle to the government's antitrust case against Microsoft Corp.
(MSFT). But it wasn't the knockout blow prosecutors have suggested, legal experts say.
Antitrust law has enough wiggle room for differing interpretations of the threats and bare-knuckled
pressure senior IBM manager Garry Norris testified to in District Court here. One judge's Sherman
Act violation is another's example of rough-and-tumble corporate negotiating, attorneys and legal
scholars said.
Norris's testimony proved the highlight of the government's two-week rebuttal case against the
Redmond, Wash., software maker, which ended Thursday. On Monday, Microsoft brings the first of
its three rebuttal witnesses to the stand.
Prosecutors Happy With Norris Appearance, And Show It
Most observers believe Norris was a substantial plus to the government's case, which claims
Microsoft wielded its Windows monopoly against browser maker Netscape Communications Corp.,
which is now a part of America Online Inc. (AOL).
Most certainly, the testimony offers Judge Thomas Penfield Jackson, who will decide the case, more
grist should he conclude Microsoft engaged in a pattern of illegal anti-competitive behavior.
As this week came to a close, government prosecutors didn't hide their pleasure with Norris's three
days on the stand. At times combative, at times a compelling storyteller, Norris said Microsoft
promised IBM lower prices on its Windows software if it sold computers with Microsoft's Explorer
browser and higher prices if it continued using Netscape's rival Navigator.
He also said IBM paid higher prices for Windows 95 than rival Compaq Computer Corp. (CPQ)
because it marketed competing operating system OS/2, and Lotus's SmartSuite, which is a rival to
Microsoft's Office.
David Boies, the Department of Justice's lead trial attorney, called Norris's testimony "clear, sharp,
convincing and documented evidence of Microsoft's monopoly power." It is "very powerful testimony
about the central issues in this case," and it shows that consumers were deprived of lower prices for
computers, a big issue in antitrust law, he said.
Norris proved the "missing link" in the case by offering the first live courtroom evidence from a large
PC maker, said Tom Miller, Iowa attorney general. Iowa is one of 19 states participating in the suit.
The government has alleged Microsoft displayed a similar pattern of behavior by urging Apple
Computer Inc. (AAPL), Netscape and Intel Corp. (INTC) not to compete, but the evidence in each
of these instances wasn't as clearly documented as with IBM.
Lawyer Thinks New Legal Ground Could Be Broken
Microsoft in court has denied that it encouraged any of the companies not to compete. It also was
able to attack, with some success, Norris's claims. In one instance, Microsoft presented a memo
from an IBM executive who attended a key Microsoft meeting with Norris. The memo makes no
mention of the pricing threats Norris claimed came over IBM's use of Netscape.
Microsoft attorneys also pointed to an IBM e-mail from the following month that stated: "There is no
proposal on the table from Microsoft to exclusively bundle (Explorer)."
Outside of court, a Microsoft spokesman characterized Norris's notes of the meeting as "isolated
scribblings" and said Compaq received a better price for Windows 95 because it cooperated with
Microsoft in developing software.
"The software industry is not a game for people in short pants," said Robert McTamaney, an antitrust
attorney at Carter Ledyard & Milburn in New York. "These are healthy, vigorous competitors
perfectly able to fend for themselves."
McTamaney said he didn't believe the Netscape-related threat to IBM, if true, amounted to an
antitrust violation by itself, largely because no contract was signed.
Perhaps more significant, though, is how it fits into the broader pattern of Microsoft's behavior, said
Joe Sims, a lawyer with Jones Day Reavis & Pogue in Washington.
"I think it is significant," Sims said.
Experts say anticompetitive law under the Sherman Act is unsettled, in part because few cases exist
for reference. Perhaps the most relevant is the 1982 attempted-monopolization case against AMR
Corp.'s (AMR) American Airlines, in which former President Robert Crandall was tape recorded
offering to raise prices if Dallas/Fort Worth airport competitor Braniff Inc. did. Braniff turned the
offer down, but an Appeals Court still ruled against American.
Microsoft will argue that its behavior didn't exclude other products from the market, and the
government will claim it acted to foreclose its competitors. This is where new legal ground could be
broken in monopolization law, Sims said.
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