2001: Microsoft in court

In 2001, Microsoft was found guilty of illegal practices. Yet still nothing has happened. What went wrong, and where does it go from here?
Written by Matt Loney, Contributor

A little over a year ago, Judge Thomas Penfield Jackson, presiding over the Department of Justice (DoJ) case against Microsoft, ruled that the software giant be broken into separate operating systems and software applications companies.

He stayed action pending appeal, but even the Appeals Court found Microsoft to have broken the law.

So where did it all go wrong for the DoJ?

The year got off to a rocky start for the Department of Justice case against Microsoft, when the software giant got an unexpected chance in the appeals process to attack Judge Thomas Penfield Jackson -- the judge who delivered the damning verdict against Microsoft in late 2000.

In a scheduling order issued one afternoon in early February, the Court of Appeals included time during oral arguments to address Jackson's courtroom procedures and post-trial comments. Neither side -- not Microsoft or the DoJ -- had requested time to discuss Jackson, but the decision gave Microsoft a second crack of the whip.

In briefs filed during its appeal, Microsoft relentlessly attacked Jackson's credibility, using statements he made following the trial's close to question his credibility and handling of the case and to infer bias.

As the hearings progressed in the Court of Appeals, it became increasingly obvious that Microsoft would avoid a split. Judge Jackson was removed from the case.

In late June, almost exactly a year after Jackson's original ruling, Microsoft won its appeal and dodged a break-up, but the charges over illegal monopoly practices, in contravention of the Sherman Act, stood.

Indeed, the Court of Appeals' ruling was so damning that many experts felt Microsoft would still face stiff penalties over its business practices.

Shortly afterwards, while talks of settlement were still just rumours, Microsoft was caught resorting to dubious practices -- raising the dead no less -- to show how much grassroots support it had.

Lobbyists acting for Microsoft were exposed as having dispatched letters from two deceased people as part of a campaign to persuade government prosecutors to lay off the company in the antitrust case. US lobby group the Campaign Against Government Waste (CAGW) posted the letters, intended for the Utah attorney general who is prosecuting the antitrust case, as part of an attempt to convince state attorneys general that there is a grassroots campaign against the case.

In September, Microsoft and the DoJ were still battling it out under the auspices of US District Judge Colleen Kollar-Kotelly, who took over from Jackson after the Court of Appeals ruling. Ever since Bush came to power Microsoft's chances had been looking better, and the events of 11 September are thought to have made the DoJ mode amenable to a quick settlement, the Bush administration being keen to avoid an outcome that would put further pressure on the US economy.

Microsoft had been trying to return the focus to the Supreme Court, slamming a government brief urging the Supreme Court to reject the company's request for appeal.

Microsoft wanted the nation's highest court to throw out Judge Thomas Penfield Jackson's two-part ruling, which had been upheld by seven appellate judges in June. Microsoft contended that Jackson's out-of-court comments to the media before he drafted the ruling warranted Supreme Court review.

Kollar-Kotelly's main task was to drafting a new remedy to deal with the eight separate antitrust violations upheld by the Court of Appeals.

Among those violations:

  • Exclusive deals with PC makers to carry Microsoft products.
  • Overriding people's choice to use Netscape Navigator.
  • Intermingling of Windows and browser code so that Internet Explorer could not be deleted.
  • Deals with 14 out of the top 15 Internet service providers for exclusive promotion of Internet Explorer.
  • Exclusive contracts with some developers to create software that would make Internet Explorer the default browser.
  • Making Internet Explorer the exclusive browser for Apple Computer, in part by threatening to end Office development for the Mac.
  • Deceiving Java developers into believing Microsoft's Java was cross-platform when it was not.
  • Compelling Intel to abandon its own version of cross-platform Java.

The government was also expected to expand the case beyond the original ruling and probe Windows XP, Passport authentication and Microsoft's forthcoming .Net software-as-a-service strategy. Such probes would have been possible because the goal of an antitrust remedy is to restore competition, so it can be forward-looking.

Then came the body blow. On Friday, 2 November, Microsoft and the DoJ reached their famous settlement.

Consumer groups lamented the deal, Sun said it would sue over the inadequate remedies it said the settlement proposed, and several states said they would take the litigation further.

Microsoft is not yet in the clear.

Despite the Department of Justice settlement, which 78.4 percent of ZDNet UK readers rated as "Too lenient" in a poll conducted shortly after the announcement, the European Commission is pursuing its investigation into Microsoft's anticompetitive practices.

In Europe, Microsoft stands accused of abusing its dominant position in violation of Article 82 of the EU Treaty. Like the US Sherman Antitrust Act, under which the DoJ prosecuted Microsoft, Article 82 of the EU Treaty prohibits the manipulation of a dominant position in one market to gain a competitive advantage in another market.

The EC's action is aimed at "anticompetitive" actions taken by Microsoft to use its dominance in the desktop operating system market to improve its position in the server software market. Microsoft is also accused of using its dominance in the low-end server market to quell competition in that market. In August, the EC issued a new Statement of Objection, expanding its investigation of Microsoft to look into whether it is illegally tying its Media Player to its Windows operating system.

This case is expected to last well into the middle of 2002. If Microsoft is found guilty, it could face a fine of up to 10 percent of its annual revenue and/or obligations of conduct.

Think it's all over? The antitrust case against Microsoft can still go back the to Court of Appeals, and then there's the European Commission's investigation... See ZDNet UK's DoJ/Microsoft News Section for the latest headlines.

See ZDNet UK's Christmas & New Year Special for our look at the tech world in 2001, and what's coming up in 2002, plus a shopping guide with reviewers' best buys.

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