U.S. confident of ruling in
Microsoft case, but remedies
up in the air
BY DAVID L. WILSON
Mercury News Washington Bureau
WASHINGTON -- Government lawyers, emboldened by Judge
Thomas Penfield Jackson's earlier decisions, are counting on him to
soon declare that Microsoft Corp. has deliberately and systematically
violated antitrust laws. But despite their private talk of impending victory, the Justice Department and
19 state attorneys general who are plaintiffs in this historic case remain unsure of the precise penalties
they will ask Jackson to impose on the company.
Sources close to the government's case say they hope Jackson will find that Microsoft's behavior was
both outrageous and pervasive enough to justify a request for a ``substantial' remedy, such as a
breakup of the company. They insist, however, that the government has not decided whether or not
to ask Jackson to break up Microsoft.
``Nobody can tell you what remedy is appropriate until Judge Jackson tells everybody how the laws
have been broken,' said one individual who has worked with the government on the case and spoke
on condition of anonymity.
People working with the Justice Department, which has largely controlled the presentation of the
case, say officials would prefer a ``structural' remedy over a ``conduct' remedy for a multitude of
reasons, some practical and some political.
A conduct remedy is simply a judicial instruction to stop engaging in specific behavior -- such as
requiring restrictive contracts -- that the court finds unacceptable. A structural remedy -- which could
include, but is not limited to, a breakup -- is aimed at permanently altering the company or the
affected market so substantially that further violations are impossible.
In recent years, the courts have shied away from imposing structural remedies in antitrust trials
because of an increased acceptance of the notion that the government should minimize its influence on
free markets.
In this case, however, if Jackson finds that Microsoft has flagrantly violated antitrust laws, government
lawyers believe they can convince the relatively conservative jurist that a structural remedy is the only
effective solution. They're also prepared, though, to focus on conduct remedies if they decide that's
the best they can achieve.
On Nov. 5, Jackson declared that Microsoft had monopoly power in the market for personal
computer operating systems, which it dominates with its Windows products, and has used that power
to stifle competition and harm consumers.
Evaluating the facts
He is now evaluating the facts developed during the trial, studying previous antitrust rulings from cases
going back nearly a century and trying to render a decision consistent with those cases, all of which
constitute a patchwork of often contradictory tests and theories.
If Jackson accepts nearly all the government's arguments, as he has thus far, sources close to the
government's case believe the company's behavior in court will help the government convince the
judge that Microsoft can't be trusted to adhere to the terms of a conduct remedy.
``What we've seen is a parade of Microsoft executives doing things like repeatedly denying under
oath that the internal company documents presented at the trial don't mean what they clearly do
mean,' said one source. ``Microsoft has given Judge Jackson no reason to trust any representation
made by the company.'
Microsoft officials continue to insist that the company has not broken any laws and will eventually be
vindicated in court.
The government, however, believes it has overwhelmingly proved its case and is hoping for a big win,
which should open the door for a structural remedy. The government's goal is to create competition
operating system market, something Jackson has already concluded does not currently exist.
A breakup of Microsoft is seen by many working with the government as the cleanest way to achieve
that goal. By creating several new entities, each of which would have the right to sell the Microsoft
operating system, the court could create competition in the market, proponents say.
Other factions involved with the government's case, however, have argued that any remedy based on
a breakup will be politically explosive and they are pushing different types of structural remedies, such
as leaving Microsoft intact but allowing other companies to sell the Windows operating system.
Some who represent states in the government's coalition are still pushing for conduct remedies over a
structural solution, but, assuming that Jackson comes down hard on Microsoft, that battle is largely
over.
Structural proponents have argued that any solution needs to be something that does not require
long-term oversight, since changes in an administration can lead to changes in antitrust enforcement.
But the government's coalition remains somewhat fractious, with different state attorneys general
pursuing objectives that may or may not be in line with the majority of the other members.
Those working closely with the coalition say that some of the state attorneys general are pursuing the
case largely to further their own personal political ambitions, and so could conceivably withdraw from
the coalition if the end game approaches a conclusion that could harm them politically. But these same
sources point to the withdrawal of South Carolina in December 1998 as evidence that such events
are unlikely to affect the course of the case.
Not predictable
In some ways, the government coalition remains the least predictable element in the case.
While the Justice Department was pursuing its own antitrust action against Microsoft, the states filed
their own case, with some hoping that a successful conclusion would eventually include financial
penalties against Microsoft, something that's not going to happen in the current case. Jackson
combined the state and federal cases by judicial fiat before he began the trial on Oct. 19, 1998.
While in theory both the Justice Department and the states share responsibility for the course of the
trial, in practice it is the federal government that has run the case; representatives of the states have
spoken in Jackson's court on only four occasions during the trial, and on one of those occasions,
Jackson ordered the attorney to keep still.
Observers believe the states will be content to continue backing up the federal government, and don't
expect anyone even to attempt to pursue a resolution or remedy in the case apart from any of the
other players.
``Until relatively recently, the states have not been active in antitrust at all,' said Robert Litan, director
of economic studies at the Brookings Institution and a former deputy assistant attorney general for
antitrust in the Clinton administration.
``I expect that they'll keep riding this train. Everybody knows who won this case: It was David Boies
and the Justice Department. The states have to know at the end of the day that if they split from the
department in any way, they're twisting in the wind.'
November warning
In November, Jackson reacted to news reports suggesting an impending schism in the government's
ranks by issuing a clear warning in his chambers, telling the assembled lawyers, ``The harmony
between the states and the DOJ so far has been, I think, enormously helpful and I would like to see it
continue. I would not like to have to deal with divergent points of view.'
Most experts saw that as a pre-emptive strike by Jackson, letting everybody know that he won't take
kindly to a fractured set of plaintiffs, and few expect any member of the government coalition to
ignore it.
``The judge has great deal of discretion in this kind of situation,' explained Joseph C. Weinstein, a
well-known litigator with the law firm of Squire, Sanders & Dempsey LLP who has followed the case
closely. ``This judge has signaled to all the parties that if you want to be heard, if you want to have
influence over the result, the only effective way to do that is speak with a unified voice.' |
