Government Rebuts Microsoft Antitrust Filing

BOSTON (01/25/2000) - Microsoft Corp. ignores the substantive findings of a U.S. federal court judge, "addresses strawmen," "takes a series of potshots" and misstates legal standards in an attempt to evade the issues at hand, the U.S. government argued today in its rebuttal to the software maker's proposed conclusions of law filed last week in the ongoing antitrust case.

The proposed conclusions of law allowed Microsoft last week to lay out how the company thinks U.S. antitrust laws should be applied to U.S. District Court Judge Thomas Penfield Jackson's findings of fact issued last November in which he ruled that the software vendor is a monopoly.

Predictably, Microsoft defended its behavior, which the U.S. Department of Justice (DOJ) and 19 U.S. state attorneys general contend is illegally anticompetitive. The company also argued that it does not have a monopoly with its Windows operating system, and has not improperly used its position in that market to squelch competition among Internet browsers. [See "Microsoft Refutes Jackson's Monopoly Claim," Jan. 18.]But the government rebuttal filed today and available at the DOJ Web site -- http://www.usdoj.gov/ -- counters that Microsoft's arguments don't address the pertinent points of Jackson's ruling. Instead, Microsoft "improperly evades the substantive importance of the finding of monopoly power," cites case law and legal standards involving businesses other than those making software and circumstances that bear no relationship to the government's case against the company, the rebuttal argues.

"Microsoft fails to identify any basis for denying the plain legal consequence of this court's findings; that Microsoft unlawfully maintained a monopoly," the government rebuttal asserts.

The 36-page document, which includes 29 pages of arguments, goes point-by-point through the main issues in the case, including the allegation that Microsoft used its Windows OS monopoly to improperly gain an advantage in the browser market, effectively running Netscape Communications Corp. (now part of America Online Inc.) out of business.

Microsoft has said that offering Windows 98 and its Internet Explorer browser as a bundled -- or "tied" -- product benefits consumers. There is a legal standard that establishes when "tying" is acceptable and when it is anticompetitive, and that issue was addressed in the trial, the government rebuttal said. However, Microsoft did not adequately tackle Judge Jackson's findings in that regard in its brief last week, the rebuttal argues.

"Microsoft quotes several findings to support the assertion that there are certain benefits to the commingling of Internet Explorer and Windows," the government rebuttal says. "But this court's findings plainly say the opposite:

There are no benefits to combining a browser with Windows 98 that cannot be achieved through separate distribution of two products."

Moreover, the government rebuttal argues that "here, not only are consumers who do not want Internet Explorer forced to take it nonetheless, incurring costs such as performance degradation, compatibility with other software, and increased security and instability risks, but rival browser firms face as a result of Microsoft's binding arrangements precisely the sort of higher costs of gaining customers that tying law condemns."

The software maker has argued that it had no specific intent to drive Netscape out of business, and instead wanted to prevent Netscape's Navigator software from becoming the standard browser -- an argument the government claims is "doubly mistaken." The company's ultimate goal isn't at the heart of the case, "but simply whether it had 'a purpose to acquire monopoly power,'" the rebuttal said.

"Second, as a matter of well-settled antitrust law (and basic economics), the intended monopoly power does not require obliteration of rivals; it is enough that the rivals be weakened enough so that the monopolist can exercise monopoly power without effective competitive constraint," the government rebuttal added.

Microsoft has until Feb. 1 to file its own rebuttal of the government's rebuttal. Oral arguments concerning how both sides feel applicable antitrust law should be applied to Judge Jackson's factual findings are set for Feb. 22.

It may still be possible for the case to be settled before Judge Jackson issues his final ruling, expected by mid-year. He has appointed a mediator to meet with both sides. Published reports have said that the U.S. government wants to break up Microsoft into two or three separate companies. The antitrust trial started last October.

Microsoft, in Redmond, Washington, can be reached at +1-425-882-8080 or at http://www.microsoft.com/. The Department of Justice, in Washington, can be reached at http://www.usdoj.gov/.

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