Microsoft 'a Monopoly' rules Judge Jackson

Judge Thomas Penfield Jackson has banged the gavel: Microsoft is a monopoly, and it has harmed competitors and consumers
Written by ZDNet UK, Contributor

Microsoft's antitrust case moved from the court of law to the court of public opinion Sunday as both sides turned the nation's TV networks and newspapers to put their own spin on the widely perceived milestone pro-government, anti-Microsoft ruling issued by US District Court Judge Thomas Penfield Jackson two days ago.

In a full-page ad in Sunday's Washington Post, Microsoft published Gates' "Letter to Customers, Partners and Shareholders. "Microsoft is committed to resolving this matter in a fair and responsible manner, while ensuring that the fundamental principles of consumer benefit and innovation are protected."

Appearing on Fox News Sunday, Microsoft Chief Operating Officer Bob Herbold said "there's nothing we'd like more than to settle the case," terming Judge Thomas Penfield Jackson's ruling as "one step in a long process."

Microsoft's chief nemesis, US antitrust chief Joel Klein, also took to the airwaves Sunday, appearing on three shows, saying settlement was still an option -- but so was a breakup. "We would need a settlement that deals with the very findings that the court made in this case, a settlement that produces consumer choice, innovation, and competition in the market," Klein said on Fox News Sunday. Neither Klein nor Herbold would discuss whether settlement talks were underway or even being discussed among the parties.

Even President Clinton weighed in to the case. White House chief of staff John Podesta told NBC's Tim Russert on "Meet The Press" on Sunday that the administration is generally pleased with Friday's finding that the software giant is a monopoly and has used that position to stifle its competition. "It does show that the antitrust laws ... are just as relevant today as they were in the 1890s when we lived in an era of Standard Oil," he said.

In the 207-page findings of fact he issued Friday, Judge Jackson backed the government's main charges against the software maker -- virtually in toto. And in so doing, he foreshadowed how he might rule when the time comes to determine whether Microsoft broke the law.

The scope of the defeat was surprising, if not shocking, according to legal analysts and even some of the participants. Prior to the release of the Judge's ruling, officials on both sides privately acknowledged they might lose a few while the other side might win a few.

Klein, who heads the US Department of Justice antitrust division, called the ruling in the trial's findings-of-fact phase a "tremendous victory for America's consumers." The state attorneys general who joined the Department of Justice in the case reacted by saying that the ruling justifies "far-reaching remedies" against the software giant.

For the most part, the DOJ's triumph didn't surprise industry players. Almost without exception, long-time Microsoft rivals reacted by saying they'd expected to see Microsoft declared a bullying monopolist. "The ruling confirms what we all know," said Novell CEO Eric Schmidt."

Now Microsoft's fate remains in the hands of a judge who legal experts believe is all but ready to throw the book at the company.

Jackson said Microsoft had used its position to harm consumers and rivals. What's more, he said Microsoft continued to enjoy an "extremely large and stable" portion of the market for software operating systems. In fact, Jackson said Microsoft was so dominant in the market for Intel-based operating systems "that if it wished to exercise this power solely in terms of price, it could charge a price for Windows substantially above that which could be charged in a competitive market."

Jackson concluded that the company's share of Intel-compatible PC operating systems was "extremely large and stable" and protected by a high barrier to entry. As a result, he said, Microsoft's customers "lack a commercially viable alternative to Windows."

"They have also caused less direct but nevertheless serious and far-reaching consumer harm by distorting competition," according to Jackson.

Ever since the lawsuit was filed in May 1998, Microsoft has argued that the company was being penalised for aggressive but not illegal behavior. But in painting Microsoft as willing to use its power to harm other firms, Jackson has laid the groundwork for concluding that the company broke the law.

"Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products," Jackson wrote.

What happens next in the legal proceedings? Microsoft and the DOJ will be back before Jackson within 30 days with their own findings of law -- arguments as to how the judge should rule based on the findings of fact. A final decision from Jackson is not likely before early next year.

An appeals court that could eventually hear the case already has sided with Microsoft twice. In 1995, the US District Court of Appeals for the D.C. Circuit overturned a decision by Federal Judge Stanley Sporkin, who had refused to sign a consent decree between Microsoft and the DOJ because he felt it wouldn't rein in the company. And in 1998, the appeals court reversed another anti-Microsoft ruling, this one by Judge Jackson. In that ruling the appeals court declared that Judge Jackson was wrong in ordering the company to unbundle its Internet Explorer browser from Windows 95. Microsoft may well take its chances for a third exoneration, pushing forward without settling.

Reached by telephone, Stephen Houck, one of the two lead prosecutors in the case, who returned to private practice, said he detected a change of tone in reading Microsoft's initial statements following the ruling. "Gates sounds more conciliatory than in the past," he said.

However, Houck was uncertain whether the weight of the ruling would provide an extra incentive to Microsoft to settle. "In the past, what Microsoft has proposed has not been sufficient to allay the concerns we had," he said.

Other trial-watchers remained just as unconvinced that the ruling might draw the two sides together. Indeed, some, like antitrust attorney Stewart Gerson, suggested Microsoft might opt to roll the dice and take its chances with an appeals court.

Gene Crew, an attorney with Townsend, Townsend & Crew agreed. "The judge just really rips Microsoft's arguments," said Crew, who has represented plaintiffs in a private antitrust case against Microsoft. "But they're not in settlement mode."

MSNBC contributed to this story

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