August 11, 1999

Microsoft and U.S. Present Fact-Finding Documents

By STEVE LOHR

ASHINGTON -- The witnesses have departed, but the paper wars began Tuesday in the Microsoft antitrust trial as both sides presented the court with book-sized documents detailing what each camp believes are the facts of the case.

	Associated Press
	Judge Thomas Penfield Jackson weighs facts in the Microsoft case.

The Government and the Microsoft Corporation, not surprisingly, offered the court two entirely different stories. They did that in person in the courtroom beginning last October, but today's filings more sharply delineate their arguments in painstaking detail, allegation by allegation, witness by witness, E-mail by E-mail.

The Government contends that Microsoft engaged in attempted market collusion, the illegal tying of one product to another, exclusionary dealing and predatory pricing. Microsoft replies that the Government may have succeeded in "portraying Microsoft as an aggressive company that occasionally engages in tough tactics," but that none of it rises to the level of an antitrust violation.

The language of the documents is often even more emphatic than was the courtroom talk, suggesting a hardening of positions on both sides.

The Justice Department and the 19 states suing Microsoft assert that the big software maker company has a "powerful and well-entrenched operating system monopoly" with Windows, which controls the basic operations of most personal computers. Microsoft counters that the evidence in the case and the recent rise of new competitive threats make it "painfully obvious that Microsoft does not possess monopoly power -- the ability to control prices or exclude competitors."

The Government contends that taken together the mosaic of Microsoft's misconduct amounts to "a predatory campaign" to stifle competition from Internet software and restrict consumer choice. "In other words," the Government said, "Microsoft prevented consumers from getting what they wanted so that Microsoft could keep what it had -- a monopoly in operating systems."

In the Microsoft view, the Government's consumer-harm claims are the Achilles' heel of the Government's case. Microsoft says that its entire business model is geared to creating "improved products at low prices."

"Despite vociferous complaints from a parade of Microsoft's rivals, who obviously would prefer less vigorous competition," the company declared, "there was remarkably little evidence about the impact of Microsoft's actions on consumers, who are, after all, the intended beneficiaries of the antitrust laws."

Each such general statement is accompanied by citation after citation from the court record. The Government's documents run 774 pages, and Microsoft's 442 pages. Every Microsoft action and dealing with another company -- America Online, Intel, Apple, I.B.M., Sun Microsystems and others -- is reviewed by each side, point and counterpoint.

For Judge Thomas Penfield Jackson, the fact-finding documents provide a kind of sourcebook and balancing tool.

The evidence cited in the pair of legal tomes -- called proposed findings of fact -- is not new. But this stage of the trial process permits each side to lay out its interpretation of the evidence unfettered by cross-examination and conflicting evidence submitted in the courtroom.

"This is the chance for each side to present its favorite narrative of events," said William Kovacic, a professor at the George Washington University law school.

Each side will submit revised findings of fact next month, to take into account what the other camp asserted Tuesday. For Judge Thomas Penfield Jackson, the fact-finding documents provide a kind of sourcebook and balancing tool, legal experts say.

For each allegation, the judge weighs the arguments side by side. In a civil action, the legal standard that must be met by the plaintiff -- the Government, in this case -- is known as preponderance of the evidence. In simple language, the court must answer the question, "Is it more likely than not that the Government's allegation is true?"

Those kinds of "balancing decisions" are the ones Judge Jackson must make repeatedly in this complex case -- and it is why, legal experts say, the proposed findings of fact can be so crucial to the outcome of the case.

"These documents are road maps for the judge," said Andrew Gavil, a professor at the Howard University law school. "If they work well, they point the judge in a direction that each side wants him to face in looking at the case."

Microsoft clearly wants Judge Jackson to look at and consider the multibillion-dollar purchase of the Netscape Communications Corporation by America Online Inc., which was announced last November, after the trial began.

From the first page of its filing, Microsoft points to the America Online-Netscape deal, which includes a side alliance with Sun Microsystems Inc., as proof of what Microsoft argued at the trial: that the company lives in a fast-changing industry, that its seemingly powerful market position is constantly under threat and that the suit itself was the result of its competitors' winning over the Justice Department to their side.

Citing Netscape's link to America Online, the on-line service that accounts for 40 percent of all Internet access in the United States, Microsoft contends that "AOL is now in a position of control with regard to usage of Web browsing software."

To make the point that Netscape now has a powerful corporate parent, Microsoft points to previously sealed testimony saying that America Online's board was told the company would be willing to spend $10 a copy to promote Netscape's browser.

Microsoft tries to cast doubt on the candor of two Government witnesses -- a Netscape executive, and one from America Online -- by noting that depositions and documents show that the America Online-Netscape talks were under way before the trial began.

The Government responds that on the contrary, the acquisition of Netscape proves its point. By using its market power to prod computer makers and Internet access suppliers into exclusionary deals, the Government asserts, Microsoft succeeded in sufficiently limiting Netscape's distribution and blunting its challenge to Windows.

"Netscape was acquired because it had been damaged by Microsoft's campaign," the Government stated. And it cited deposition testimony from Stephen M. Case, the America Online chairman, saying, "we bought Netscape, to some extent, despite the browser business," explaining that the main attracttions were Netscape's popular Web site, server and electronic-commerce software.

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The Government is trying to focus Judge Jackson's attention in particular on its claims of consumer harm -- even though most consumers do not see much evidence of it as PC prices continue to decline.

The Government has tried to refine and strengthen its consumer argument. First, it says that operating- system software prices would be lower if Microsoft were not a monopoly and that consumers would have more choice. The Government cites desposition testimony from PC makers saying they would prefer to have more choice.

The Government then raises the specter of future harm, a distortion of the path of innovation, unless Microsoft is reined in. The company is intent on extending "its monopoly powers into servers, Internet protocols, and other industry segments."

''Microsoft's efforts to pre-empt threats to this control will, in part, inhibit the emergence of other potential paradigm shifts" -- a rerun, the Government warns, of how Microsoft dispatched the first wave of the Internet challenge.

That, Microsoft says, is a distorted view of the company and industry environment it inhabits. "In short," Microsoft said, "the world is changing very rapidly, and the changes that are taking place are inconsistent with the notion that Microsoft possesses durable monopoly power."

Sometime this fall, Judge Jackson, after poring over the arguments from both sides, will issue his own findings of fact. These will be first definitive signal of Judge Jackson's position. His findings will be the basis for his conclusions of law -- and his findings, legal experts predict, could also serve as a new prod to reach a settlement.

In the absence of a settlement, closing arguments are scheduled to be heard in September, and a ruling is likely around the end of the year.

Both sides have posted their filings on Web sites. The Government's document can be found at www.usdoj.gov/atr. The Microsoft document is at www.microsoft.com/presspass/ trial.

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Related Sites
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• www.microsoft.com/presspass/

• www.usdoj.gov