Microsoft in the dock economist.com./editorial/freeforall/6-3-99/wb9857.html
Bill's former favorite magazine weighs in, and their reading is somewhat less sanguine than the other wrapups I've posted. The Economist is a little flaky in what they keep on line, so I'm posting this in full for posterity, with a few highlights in bold. Note that they're not particularly impressed by some of the 'softies we thought got off easy, either.
Cheers, Dan.
The world's biggest software company has had a bad trial
TO MOST of the Microsoft team camped in Washington, DC, for the duration of their company's landmark antitrust trial, the past few weeks have been depressing, even shocking. As one of them admitted: “If this was a jury trial, we'd have run the white flag up already.”
The absence of a jury may be enough to provide a glimmer of hope for the software company. [ds: ?????] What is more, even if the judge hearing the case, Thomas Penfield Jackson, finds against Microsoft, there remains the possibility of rather more sympathetic treatment in the Washington appeal court. And there is always the Supreme Court.
Even so, both sides understand the importance of what has happened in Judge Jackson's courtroom during 62 days of testimony by 24 witnesses; and both think that Microsoft's defence is in disarray. Last week the court adjourned until April 12th, when each side will call three witnesses to rebut its opponent's evidence. There is speculation that Bill Gates himself might testify in an effort to counter the awful effect of his videotaped deposition, which showed the brilliant strategist rocking in his chair, clutching his knees and apparently ignorant of every big development within his company.
But nobody should count even on that. David Boies, the formidable trial lawyer working for the government, has eviscerated a string of top Microsoft executives on the stand. The prospect of his being let loose on Mr Gates in open court hardly bears thinking about.
After rebuttals, both sides will present their closing arguments. Judge Jackson will then retire to consider his verdict. Although he can take as long as he wants to make up his mind, a decision is expected in June or July. If the government has prevailed, demonstrating that Microsoft is a monopoly that has abused market power through a pattern of predatory and exclusionary practices, as most antitrust experts now expect, it will ask the judge for a hearing to determine remedies. Only then will Microsoft be able to lodge an appeal.
In that event, Microsoft will argue that, despite all the courtroom fireworks, most of the written testimony of its witnesses has entered the court record unchallenged by Mr Boies. Furthermore, the company's lawyers will claim that the government has failed to demonstrate any actual harm to consumers as a result of its actions. Although competitors, such as Netscape, may have been roughed up, there is no evidence that Microsoft illegally used monopoly power (which it still denies having) to foreclose markets to potential rivals.
Whether this cuts much ice will depend heavily on the composition of the three-judge appeal-court panel. Most of the 11 judges eligible for selection were appointed by presidents Reagan or Bush and at least six are thought to have laisser-faire views on antitrust typical of the Chicago School of economics.
Last summer, a different panel gave Microsoft an interim legal victory by a majority of two to one. It found that Microsoft's tying of its Internet Explorer browser to the Windows operating system—the original complaint made by the Department of Justice (DoJ)—was legal so long as consumers stood to benefit. Had the DoJ not been about to prosecute on a much wider series of charges, it would have appealed.
Even if the appeal court agrees that Microsoft is a monopoly, it might still rule that the company has done nothing wrong. If the court continues to find some consumer justification for Microsoft's actions, such as its tight control over the Windows desktop, that could take most of the sting out of any judgment. This seems to be what Microsoft is pinning its hopes on.
Judge cred
However, if Judge Jackson comes down against Microsoft, he could decide to frame his judgment in terms that restrict the appeal court's room for manoeuvre. Or he might assume that, whatever happens, the case will end up with the Supreme Court and simply follow his instincts.
In his support, the judge will have a mountain of evidence amassed by the government from Microsoft's internal e-mails and management-briefing documents. Cumulatively, they outline in detail the way in which a strategy was carefully formulated to undermine the resistance of any company, such as Netscape or Apple, that dared to intrude on the Windows platform. Netscape had to be corralled or eliminated, not so much because Microsoft wanted to own the browser market (though it did), but because the browser might one day become an alternative to Windows.
Some of the most revealing evidence surrounds the apparent willingness of Microsoft to bully not just potential rivals, but supposed partners, including Intel and the PC makers. The slightest reluctance from firms such as Compaq, Hewlett-Packard and Gateway to do Microsoft's bidding was met with the threat of taking away their Windows licence. In fact, far from being regarded as equal technology partners, the PC makers were seen by Microsoft as merely a distribution channel that occasionally needed whipping into line or encouraging with a modest reward.
If the evidence has proved even more lurid than expected, the way in which Mr Boies has managed to juxtapose it with the sworn testimony of a series of Microsoft witnesses has hugely increased the damage. Given Microsoft's earlier confidence that the government's case would fall apart when it told its side of the story, the collapse in court of successive Microsoft witnesses has been mysterious, and embarrassing.
Paul Maritz, the firm's third-highest executive, was forced into evasion and concession; James Allchin, the Windows team leader, stumbled over misleading video evidence; Dan Rosen, the man accused of offering Netscape a market-dividing non-aggression pact, was portrayed by the prosecution as a bungling liar; Joachim Kempin, the “enforcer” of Windows licence terms who terrorises the PC makers, committed one indiscretion after another.
With one or two honourable exceptions, such as the marketing chief for Windows, Brad Chase, Microsoft's executives have been unable to make their testimony square with the e-mail evidence brilliantly deployed by Mr Boies. Their credibility, in the eyes of most of those present in court, including, it seems, the judge, has been systematically shredded. When a relatively junior Microsoft lawyer attempted to salvage something of the wretched Mr Rosen's testimony, Judge Jackson offered barbed encouragement with the words: “It is always inspiring to see the young engaged in heroic endeavour.”
If Judge Jackson decides that he too has trouble in believing many of Microsoft's witnesses, not to mention the excruciating Gates video, it will have a significant bearing on the eventual outcome. No superior court can challenge this finding, because to make a judgment about a witness's veracity you have to be there when the cross-examination is conducted.
Although the government is being careful not to get on the wrong side of the judge by taking his decision for granted, there is a quiet confidence at the DoJ that things have gone well. Well enough indeed for Joel Klein, head of the antitrust division and the man responsible for bringing Microsoft to court, to have assembled a group of independent antitrust experts to start considering possible remedies.
So far, nothing has been ruled in and nothing has been ruled out. But there is a strong feeling that measures designed merely to restrain or modify Microsoft's behaviour will not go far enough. For that, Microsoft has only itself to blame. No sooner was the ink dry on its 1994-95 consent decree—an earlier attempt by the DoJ to get the software company to behave—than Mr Gates emerged to brag about how little it would affect the way he did business. Among the possibilities now being considered by the department are breaking the company up and licensing the Windows source-code to competitors.
Some may find this extreme, but if Mr Klein wins resoundingly, the Windows monopoly will be in real peril, as will the company's stranglehold over PC makers. That is still quite a sizeable “if”. Oddly, not even the remote possibility of such an outcome seems yet to have been factored into Microsoft's phenomenally strong share price. That may be another reason why the option-laden Microsofties in Washington are looking so tense. |
