The testimony spinning continues...
nytimes.com
<<The testimony last week of Garry Norris of IBM supplied some of the
most absorbing moments so far in the Microsoft trial. His litany of
accusations was lengthy and specific -- threats and enticements to
not compete against the Microsoft Corp. delivered at meeting after
meeting. His charges were fleshed out with the dates, places and names,
and backed up by his handwritten notes.
Norris, who negotiated with Microsoft on behalf of IBM's personal
computer business from 1995 to 1997, was the first representative of a PC
maker to testify for the government. David Boies, the lead trial lawyer for
the Justice Department, said the Norris testimony put a "vivid human face"
on what he called "some of the most important evidence in the case."
Yet antitrust experts say that the Norris
testimony was not a knockout punch on its
own and that its legal power may hinge on
earlier testimony, in closed sessions, on the
prices Microsoft charges PC makers for
its Windows operating system.
Big, powerful and itself long a target of
government antitrust suits, IBM was an
imperfect object of sympathy as the
representative witness for PC makers.
Ever since IBM selected Microsoft to
supply the operating system for the first
IBM PC in 1981, IBM has been
out-hustled and outsmarted by Microsoft
in the PC business -- not the sort of behavior the nation's antitrust laws
were meant to prohibit.
The government, of course, had recognized that IBM's size, reach and
complicated history with Microsoft could be used by Microsoft's lawyers to
try to undercut its contentions. For months, the Justice Department had
urged other major computer makers to take the stand -- and it pushed
particularly hard for Ted Waitt, the chairman of Gateway Inc., who
ultimately decided against it.
Microsoft's defense, antitrust experts say, may be that IBM was told it
would pay a higher price for Windows unless it agreed to "reduce, drop or
eliminate" shipments of OS/2, IBM's competing operating system.
On its face, such an invitation to a competitor to reduce competition would
be an antitrust violation, even if the offer were rejected. But the legal
standard in such cases, established in a 1984 ruling involving American
Airlines, is that the evidence be "uniquely unequivocal" -- in the airline
case, the evidence was a tape-recorded offer to jointly raise fares.
With Microsoft, there is no such clear-cut evidence. The contract
proposals presented in court were a series of suggested discounts on the
price of Windows if IBM agreed to certain promotion and marketing
efforts on behalf of Windows. No Microsoft contract offer, Norris
conceded, stated specifically that IBM must "drop or eliminate" OS/2. But
he insisted that the overall effect of the Microsoft terms would be to "kill
OS/2 in the markeplace."
Still, antitrust experts note, it is certainly legal for
Microsoft to offer a distributor -- as the IBM PC
business was -- incentives to aggressively
distribute its product. If accepting those incentives
means featuring Microsoft's Windows over OS/2
-- made by another unit of IBM -- that is mainly a
business decision for IBM to make, they say. IBM
turned down the Microsoft proposal.
A shrewdly devised offer by Microsoft perhaps,
but antitrust experts say it was probably not a
violation. "It will be very difficult for the
government to prevail on the OS/2 allegations,"
said William Kovacic, a law professor at George
Washington University.
The Norris testimony, however, went well beyond the OS/2 charge. He
asserted that Microsoft repeatedly offered IBM better terms and prices for
Windows if it favored Microsoft products ranging from so-called office
productivity applications to its Internet browsing software. When IBM
rejected those proposals, Norris said, Microsoft charged IBM more for
Windows than it charged other major PC makers.
"The strongest Norris testimony was when he recounted the incidents of
IBM not using other Microsoft software and then getting punished on the
price of Windows," said Robert Litan of the Brookings Institution, who is a
former senior official in the Justice Department's antitrust division.
Microsoft insists there is no evidence that IBM paid a higher price for
Windows than its competitors. The exception was the Compaq Computer
Corp., which received a significantly lower price, Microsoft says, because
it shared in the costs of developing Windows 95 -- a straightforward
business rationale for different terms, says Microsoft, not punishment
meted out by a monopolist.
But the government introduced an IBM document that cast doubt on
Microsoft's statement. The document, an internal memo, said IBM
believed it paid $5 to $15 more for each copy of Windows it loaded on its
machines than did Compaq, Hewlett-Packard or Dell Computer. "IBM,"
the May 1997 document stated, "currently pays a higher royalty than our
leading competitors."
Much of the detailed, company-by-company information on the prices to
makers for Microsoft's industry-standard Windows operating system was
submitted in previous testimony. To protect confidential commercial
information, Judge Thomas Penfield Jackson took that testimony in closed
sessions.
If the industry pricing information shows that IBM was paying more than
comparable PC makers, the Norris testimony may add more legal
ammunition to the government's case.
"To the extent the Norris testimony fits into the pattern of Microsoft
threats and punishment, it is another piece in the puzzle," Litan, the former
Justice Department official, said.>>
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