A Year Ago: Microsoft on Trial: Final DoJ witness today?

first published:Tue, 05 Jan 1999 17:18:16 GMT

Although the twelfth and final scheduled Department of Justice witness has yet to take the stand, Microsoft Corp. posted a rebuttal to the testimony of Massachusetts Institute of Technology economics professor Franklin Fisher to its web site yesterday afternoon.

Fisher is expected to take the stand as early as Tuesday afternoon, as Intuit president and CEO William Harris -- who began testifying Jan. 4 -- has been one of the most direct and straightforward witnesses thus far, according to antitrust trial watchers on both sides. Once Fisher is done answering questions, Microsoft will call its first witness, who is expected to be either group vice president Paul Maritz or senior vice president Jim Allchin.

Microsoft provided the roughly 150-page direct testimony of its first witness to DoJ attorneys on Monday, three days before it was obligated to do so, as kind of a "post-Christmas present," in the words of one Microsoft spokesman. Microsoft officials declined to comment on who was likely to be the company's first witness when Microsoft takes the offensive, most likely next Monday.

As of late Monday, the DoJ had yet to post Fisher's direct testimony to its web site. But Microsoft, for its part, was already attempting to discredit the government's witness. "Not since Judge Robert Bork, who abandoned his long-held views on antitrust when hired last year by Netscape, has the world of antitrust law and economics seen a more dramatic ideological reversal," stated Microsoft officials in a prepared statement.

"Professor Fisher's testimony would give readers of his 1983 book whiplash," Microsoft's statement continued, referring to Fisher's text entitled "Folded, Spindled, and Mutilated: Economic Analysis and U.S. vs. IBM" (with John J. McGowan and Joen E. Greenwood; 1983). Fisher acted as chief economic witness for IBM Corp. when it was subject of its own lengthy DoJ antitrust investigation, according to Microsoft's rebuttal.

In Fisher's book, he claims that "Monopoly profits are earned through high prices and inferior products," says Microsoft in its statement. Throughout the antitrust trial proceeding thus far, Microsoft has attempted to show repeatedly that it has not jacked up operating system or application product prices, despite the fact that it has added numerous features and functionality to its offerings.

Microsoft made its pricing/functionality argument yet again on Monday afternoon during its cross-examination of Intuit's Harris. While much of the post-lunch question-and-answer session was dedicated to an exploration of why Intuit opted to embed Microsoft's Internet Explorer, rather than Netscape's Navigator, browser in its Quicken personal-finance products, economic arguments came to the forefront on more than one occasion.

Microsoft attorney John Warden focused considerably on the reasons behind Intuit's alleged reluctance to embed Navigator 4.0 into newer versions of Quicken. Harris would concede only that Intuit is currently "in discussions" with Netscape regarding the possibility of embedding Navigator in Quicken 2000. Intuit entered into these discussions following Microsoft's decision to lift in April 1998 exclusionary contractual terms which allegedly forbade Intuit from engaging in any business relationships with Netscape, according to Harris. Warden also used much of his time Monday afternoon to show that Windows is not the only financially viable distribution mechanism available to software vendors. He entered as Microsoft trial exhibits a number of recent Intuit press releases in an attempt to show that deals between Intuit and America Online, Excite and CNNfn.com all contributed to a substantial growth in Intuit's Intuit.com online traffic.

But Emmett Stanton, counsel for Intuit and Harris, who spoke to the press at the end of Monday's hearing, said that the public shouldn't be fooled by Microsoft's insistence that preferential placement on Microsoft's Active Desktop channel bar is equivalent to deals with other software vendors or service providers.

Stanton acknowledged that "no money changed hands" when Intuit became a second-tier Microsoft "Platinum" Active Desktop partner. But he said "Intuit would have been willing to pay money" for preferential placement. All Microsoft wanted out of its agreement with Intuit was to "disadvantage Netscape" by requiring Intuit to cut off all business relationships with Netscape as part of its Microsoft contractual obligations, claimed Stanton.

Distribution arguments involving Netscape are also part of the testimony of MIT's Fisher, as are a number of issues previously dissected by other DoJ witnesses. Based on information contained in Microsoft's Fisher rebuttal, Fisher will comment on everything from the back-and-forth between Intel and Microsoft over Native Signal Processing negotiations, to the reasons behind Microsoft's Java directions.

Microsoft is expected to attempt to use the growth in the popularity in Linux in countering Fisher's testimony regarding the alleged monopoly power of Microsoft, based on the number of applications available for Windows.

"He [Fisher] makes much of the fact that there are numerous applications available for Microsoft Windows, alleging that this is a barrier to market entry a claim that is at odds with real-world events such as the remarkable rise of Linux," says Microsoft in its rebuttal. "Is Professor Fisher suggesting that consumers would be better served if there were fewer applications available for what is currently the most popular operating system?"

Take me to the DoJ/Microsoft special.

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