Lawyers to Microsoft: Nice try

In its legal response to the latest U.S. Department of Justice antitrust action against it, Microsoft Corp.

In its legal response to the latest U.S. Department of Justice antitrust action against it, Microsoft Corp. claims the scrutiny will only lead to headaches for consumers. If the company is forced to sell the components of its operating system as stand-alone products, the OS will be more unwieldy for users, company officials maintain in the 48-page document.

Hogwash, say some antitrust attorneys following the case, who believe the software industry's most prominent player may have finally gone too far in its aggressive business tactics.

"If you believe in the Wizard of Oz, you'll believe this response," scoffs James F. Rill, former head of the Department of Justice's antitrust division and a partner at the Washington law firm Collier, Shannon, Rill, and Scott.

Calling the company's arguments "totally off-base," Rill said Microsoft officials' continuing assertion that consumers demanded the Web browser be integrated into the OS is curious considering the fact that "the browser has always been available separately."

"If so many people have been demanding all this time that it be merged into the operating system, why did it take this long for them to do so?" Rill said.

Microsoft's integration of the browser into its next-generation OS, Windows 98, is allowed under the terms of the company's earlier consent decree, which arose out of a previous DOJ action, he said. But what's at issue in the current legal action is the Windows 95 bundling. This means that there's a chance the current DOJ action will force changes to Windows 95, although such an outcome is not likely to have a material effect on Microsoft's sales, Rill added.

Other observers said Microsoft could nonetheless be playing with fire by taking on the DOJ.

"(Microsoft senior VP of law and corporate affairs William) Neukom doesn't get this town," said Frank Dzubeck, president of Communication Network Architects Inc., a Washington consultancy. "This city will be around a long time, a lot longer than Microsoft, and so will the federal bureaucracy."

Dzubeck says circumstances have changed since the 1995 consent decree was signed. He notes that Congress is now accusing the antitrust watchdogs of being too soft, and that Anne Bingaman's successor as antitrust chief was approved specifically because he promised to be more aggressive in trust-busting.

He also thinks Microsoft's belligerence could backfire. Looking back at AT&T, IBM, and even to Rockefeller's Standard Oil Trust, Dzubeck notes that the government tends to punish businesses who fight back in court.

"Microsoft must settle this, and settling may mean they have to split the applications apart from the OS," he said.

But some experts say the DOJ action might not bring about any real change.

Even if the DOJ prevails in its assertion that Microsoft is guilty of violating its earlier consent decree, that alone won't mean much, said Charles Mueller, editor of the Antitrust Law and Economics Review.

If Microsoft agrees once more to abide by the consent decree, the company's "exclusion of competitors from all the markets that count will still go on," Mueller said. And the company's market share - "the 80 to 90 percent of the OS market that gave [Microsoft CEO Bill Gates] his modest current worth - will remain undisturbed," he said.

Microsoft's hint that it may need more time to gather the necessary evidence is typical, said Joel Davidow, former director of policy planning for the Justice Department's antitrust division, and who is now a partner in the Washington firm of Ablondi, Foster, Sobin, and Davidow.

"If you're Microsoft, you want to move quickly commercially and move slowly in litigation," Davidow said. "If it's found that [what Microsoft did] is all illegal five years from now, it won't matter if Netscape doesn't exist anymore."

Davidow predicts the case will be resolved in about six months.

He also said Microsoft has an advantage because the company is before a conservative judge who tends to rule against the government. "The government will have a hard time," he said.