Microsoft on Trial: 'Living in a Microsoft world'

Those hoping to see Microsoft Corp. present its side of the antitrust story first thing Wednesday morning (US time) will have to wait.

The final government witness in the Microsoft antitrust trial, MIT economist Franklin M. Fisher, will remain on the stand for part of Wednesday, answering final questions from Microsoft attorneys.

The government was expected to wrap up Tuesday afternoon, but a lengthy closed hearing, in which Department of Justice lead attorney David Boies questioned Fisher about Windows pricing, delayed the finish of the government's case.

Before both sides retreated to the closed session, Fisher testified that Microsoft is a monopoly that can set prices, citing a pricing structure that requires different computer makers, or OEMs, to pay different prices to include Windows on their machine. "The fact that there's price discrepancy leads me to believe Microsoft has power," Fisher said, adding that the company operates "a system in which Microsoft induces OEMs to do things Microsoft wishes them to do."

Fisher said he couldn't give further details without violating a court order that the pricing structure remain a secret. He said Microsoft's efforts to protect its monopoly at all costs could one day thwart choice and stifle innovation -- and may have done so already. Specifically, Franklin cited Microsoft's efforts to shove Netscape Communications Corp. out of the browser market and its exclusionary agreements with computer makers that prohibit them from promoting competing software.

Fisher said that assuming a company will not exercise its monopoly power is to "assume a benevolence" on the part of the monopolist. Playing on Microsoft's slogan, Fisher said, " 'Where do you want to go today?' is going to be wherever Microsoft wants to take you." Fisher repeated charges made last week that we will be living "in a Microsoft world," if the government doesn't take steps to reel in the software maker.

At one point, Boies asked Fisher whether, "on balance," consumers have been hurt by Microsoft's actions. Fisher said they haven't, but predicted they would be because of the company's "predatory" pricing of software such as the Internet Explorer browser. "During most predatory pricing campaigns, you could say consumers benefit -- they're getting lower prices. [But] it's what happens apart from that you have to worry about," he said, adding that Microsoft could start charging high prices for IE, which it currently gives away for free, if it successfully tramples Netscape.

In fact, Fisher said monopolists don't always use their power to maximise current profits. Sometimes they use it in other ways. He claimed Microsoft is protecting its monopoly by forcing OEMs into it exclusive deals and by bundling and overpricing complementary products such as Office.

"Microsoft is taking its profits in ways that are not reflected in price," he said. Fisher also said Microsoft's repeated claims that other companies are developing competing platforms for networked devices does not mean the software giant doesn't have a monopoly in PC software. "The fact that software generally can be quite competitive doesn't mean that the market for operating systems is competitive," he said.

And he criticised Microsoft's efforts to snuff out competing technology that the company claims wasn't up to its standards. Several government witnesses have testified that Microsoft tried to kill their technology, including representatives from Apple Computer Inc., Netscape, and Intel. Fisher said that was like saying, "An attempted murder at gunpoint should not be considered a crime because it was shown the victim was going to die of terminal cancer."

The government is expected to finish up with more snippets from Microsoft Chairman Bill Gates' video deposition. Microsoft's first witness, MIT Sloan School of Management Dean Richard Schmalensee, is scheduled to take the stand Wednesday. Outside the courthouse, meanwhile, Joel Klein, head of the DoJ's antitrust division, praised his team as it entered its final afternoon, urging trial watchers to consider the evidence presented by a cross-section of players in the industry.

"The U.S. has introduced compelling evidence showing that Microsoft has engaged in a widespread pattern and practice of anti-competitive efforts designed to crush any threat to its operating system monopoly," Klein said. But Microsoft attorney John Warden repeated claims that the case has been brought on behalf of the company's competitors, not consumers. "The curtain is coming down on a feeble case presented by the government," he said. Microsoft attorneys said they will file for dismissal after the government rests, which is a common procedural motion.

However, even they said it's unlikely the judge will rule that Microsoft doesn't have to present its case, because legally the judge can wait to rule on the matter after the trial is over.

Take me to the DoJ/Microsoft page.