DoJ filing hits MS on four counts

The DoJ and 19 states offer their conclusions on how Microsoft's business practices broke the law. But they stop short of recommending remedies.

In a filing that quotes liberally from Judge Thomas Penfield Jackson's findings of fact, the U.S. Department of Justice said Microsoft violated the Sherman Act in at least four ways.

The DoJ Monday filed its conclusions of law, which outline its views on how Microsoft broke U.S. antitrust law. The filing is the latest step in the ongoing antitrust suit filed against Microsoft by the DoJ and 19 state attorneys general. The states also submitted a separate filing.

In the filing, the DoJ said Microsoft: Illegally maintained a barrier to entry in the Intel-compatible PC operating system market; illegally tied the browser to the OS; struck illegal exclusionary agreements with ISPs and PC makers; and tried to cut off consumer access to Netscape Communications Corp.'s rival browser.

In a harshly worded filing, the DoJ said Microsoft violated Section 2 of the Sherman Act through a "deliberate plan" of maintaining high barriers to entry, so technologies such as the browser and Java couldn't threaten it. "No legitimate business justifications can account for these actions, leaving them inexplicable except on the basis of the wilfully sought benefits of maintaining the operating-system monopoly," the documents stated.

The DoJ made the claims even as it's pursuing settlement talks with Microsoft. Judge Jackson appointed 7th Circuit Court Judge Richard Posner as mediator to facilitate meetings between the two sides shortly after he issued a findings of fact document that came down harder on Microsoft than most people expected. In his findings of fact, issued November 5, Jackson declared that the company was an abusive monopolist.

The DoJ's filing reflect charges made in its original claim, filed in May of 1998. The conclusions of law, however, go through Judge Jackson's findings point-by-point, and suggest how existing case law should apply to those stipulations.

For example, the DoJ claims that Microsoft's proposal to carve up the market with Netscape -- an action ruled "a fact" by Judge Jackson -- was as illegal as a price-fixing proposal in which American Airlines suggested that it split traffic at Dallas airport with Braniff. The DoJ concludes that Microsoft violated section 2 of the Sherman Act through conduct that "was anticompetitive considered as a whole."

"Some of Microsoft's actions, viewed in isolation, may have had only a modest impact on competition," the filing states. "But the impact of any of them was in fact much greater in context because they were undertaken against the background of Microsoft's full range of platform-protecting actions."

It also said Microsoft violated section 2 by attempting to monopolise the browser market. Though more than 47 pages of the 65-page filing are devoted to detailing how Microsoft violated section 2 of the Sherman Act, the other pages assert the company also violated section 1 by illegally tying the browser to the operating system and striking exclusionary agreements.

The filing doesn't address solutions to its charges. Instead it asks the judge to "consider the appropriate remedy." Some think the DoJ favours a structural remedy, such as breaking up Microsoft, because it recently hired New York-based consultant Greenhill & Co. LLC to advise it on the financial implications of such a move. What's more, Joel Klein, head of the DoJ's antitrust division, has personally polled at least one software developer about remedies. Microsoft has until January 17 to respond to the latest filing. Then each side can submit an additional reply if the settlement talks yield no results.

In a separate document, the 19 state attorneys general also cited Microsoft violations of Section 2 of the Sherman Antitrust Act as the grounds for their proposed conclusions of law. In the document, each state detailed its own rationale for each of its proposed conclusions. However, the content of these conclusions varied little from state to state.

Just about every state claimed that Microsoft committed five key violations of law: Tying of Internet Explorer and Windows; illegal maintenance of its monopoly in PC operating systems; attempted monopolisation of the market for Internet browsers; the maintenance of exclusive relationships between Microsoft and various ISPs, Internet Content Providers and online service providers; and illegal first-boot restrictions imposed by Microsoft on PC makers, also known as original equipment manufacturers (OEMs).

The states' conclusions differ little from the government's conclusions. The states' document notes that, "As this Court has observed, state antitrust laws 'are based upon and largely emulate the federal scheme.' "

This seeming unity could prove important, since Judge Jackson said he appointed Judge Posner as mediator in the case due to fears that the states and the federal government were not moving in parallel directions as the case moved toward the remedy phase.

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