Trade groups steal antitrust show

The star of Wednesday's hearing on proposed remedies in the Microsoft antitrust trial in Washington, D.C., was neither the software giant nor the Department of Justice.

Instead, it was a document quietly submitted to Judge Thomas Penfield Jackson by two computer industry trade groups late Friday, a brief that proposes hacking the company into three distinct parts : an operating system company, an applications company and a browser company.

"It's an excellent brief," Jackson, the man who, for the time being, holds Microsoft's fate in his hands, told the packed courtroom.

The Computer & Communications Industry Association and Software and Information Industry Association filed the brief last Friday. Jackson spent much of Wednesday's afternoon session asking specific questions about portions of the CCIA-SIIA brief.

In the document, the groups argue that the judge should look back to the 1995 consent decree -- which failed to prevent another antitrust suit -- and forward to Microsoft's plans to continue to monopolise the software industry when devising a remedy.

"An effective remedy must attack Microsoft's repeatedly and ingeniously abused market power, not its anti-competitive tactic du jour," the brief states.

The trade groups endorse a wide-ranging split they claim will reel in Microsoft's predatory behavior while saving government attorneys from having to scour the company's every move to ensure it's not breaking antitrust laws. Behavioural remedies, such as those espoused in a 1995 consent decree that put some restrictions on what Microsoft can and cannot do, didn't work in the past, and won't work in the future, the organisations argue.

"The experience with the 1995 decree shows that conduct proscriptions alone are entirely inadequate to contain a firm as dedicated to the destruction of competition as Microsoft," the brief says.

Ed Black, CEO of the CCIA, said he's thrilled the judge singled out the brief. "We're hopeful there's a chance that some of our points will show up in the ruling," he said. "I think this is really great for the industry."

Black said Microsoft has attacked the group repeatedly and threatened to cut off business relationships with its members if they opposed the company in its legal battles.

According to its Web site the CCIA has 33 members from industries such as computer manufacturing, Internet service providing, software development and telecom, including Microsoft rivals Netscape Communications and Sun Microsystems. Black said only 10 percent of the group's members compete directly with Microsoft. The SIIA is the largest software industry trade association.

On April 28, the DoJ and 19 state attorneys general filed a brief urging the judge to divide Microsoft into two parts: one that would own Windows and another that would own applications such as Office and Internet Explorer.

Although the industry groups praised that approach, they also said it didn't go far enough. They accuse Microsoft of launching a concerted campaign to illegally monopolise the operating system market, punish companies that stand up to it and strike exclusive deals to thwart competition. To counteract those predatory actions, the groups urge the spinoff of a third company, one that would produce a browser.

In the brief they say Microsoft already realises the power of owning the dominant browser, quoting from Paul Maritz, who said in an email presented at trial that the most important thing for the company was maintaining control of the browser because by "controlling the client, you also control the server."

The trial was sparked by DoJ accusations that Microsoft illegally leveraged its dominance in the computer operating system industry to move into the browser market.

"To allow a Microsoft successor to use the browser as a point of leverage for its dominant applications suite would reward Microsoft for its illegal conduct," the brief says.

The groups claim a third Internet browser company would put all software companies on equal footing when it comes to adding browsing features to their products, reducing the advantage that the application company spawned from Microsoft would have. They also say the new Internet browser company would reduce the possibility of collusion between two Microsoft companies that produced either applications or the OS.

The groups also came out with an alternative proposal for Jackson, one that he seemed particularly interested in during Wednesday's court session. Under that proposal, Microsoft would be divided into two companies -- as the DoJ proposes -- but the applications company would be required to open up the browser code, licensing it without cost. The organisations said that would prevent the applications company from having any Internet-related advantage.

Both associations have been highly critical of Microsoft's actions, even though the company was once one of the largest dues-paying members of the SIIA. Last year, each issued a report saying that a structural remedy would be more effective than a behavioural one in preventing Microsoft from breaking the law in the future. And in February, the SIIA filed a friend of the court brief supporting the government, a move that prompted Microsoft to withdraw from the association the following month.

Mary Jo Foley, ZDNet News, contributed to this report

Microsoft told a judge how it should be penalised for its anticompetitive behavior. So come and find out why Jesse Berst thinks the government's plan will likely prevail.

What do you think? Tell the Mailroom. And read what others have said.

Take me to the DoJ/Microsoft special.