A federal judge's stinging rebuke of Microsoft in a preliminary finding confronts the company with a momentous challenge and sets the stage for a legal ruling that could reshape the US high-tech landscape.
US District Court Judge Thomas Penfield Jackson found late November 5th that the software giant had used monopoly power to punish rivals in the operating-systems market and distorted competition to the detriment of consumers. The 207-page document was a finding of fact that is the judge's interpretation of evidence presented to him in the trial, which began October 1998.
The Justice Department hailed the finding as an "important victory" for the government's anti-trust suit against the company.
The Microsoft Reaction
Microsoft founder and chairman Bill Gates said he "respectfully" disagreed with Jackson, insisting that Microsoft's practices were legal and had amply benefited millions of personal computer users. Gates expressed confidence his company would not be dismantled. In an open letter to customers and shareholders Sunday, Gates vowed that the software giant would ultimately prevail in its antitrust legal battles against the US government.
Gates noted that the opinion was just a preliminary "finding" and not the final word. "These findings do not represent a final decision in the case," Gates wrote. "They are one step in an ongoing legal process that has many steps remaining (including a possible appeal to a higher court). 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," Gates said.
The self-made software billionaire predicted that Microsoft would win its case in the end. "We ... believe that ultimately, the American legal system will affirm that Microsoft's actions and innovations were fair and legal, and have brought tremendous benefits to consumers, our industry and to the United States economy," Gates said.
Reaction in Silicon Valley
Silicon Valley is home to hundreds of small start-up computer businesses. Many were happy about the findings on Friday. "I hate to see the government meddle in business ... (but) this shows we are moving into the age of the little guy," said Bill Manassero, executive director of the Software Council of Southern California. "The message here is, the power and position they've had in the past, they can't rely on in the future," Manassero said.
The company Netscape, based in the heart of Silicon Valley, fiercely fought Microsoft over a share of the Internet browser market. James Barksdale, a former head of Netscape Communications Corporations said, "Its (Microsoft's) intimidating and abusive tactics that have harmed consumers."
California Attorney General Bill Lockyer had kind words for Netscape, whose Internet browser -- Netscape Navigator -- waged a bruising battle against Microsoft's Explorer. "Netscape was arguably the most innovative company on the planet," said Lockyer. "It was basically crushed by the actions of Microsoft. That can't be undone, but there ought to be efforts made to make sure that can't repeat itself."
Audrie Kraus, executive director of NetAction, a non-profit consumer organization based in San Francisco, believes Microsoft's monopoly status is pretty obvious to consumers. "You go to a store and you don't have a choice except (to buy) Microsoft's operating system," said Kraus.
Jean-Louis Gassee, President of Be Incorporated, said the nature of changes that the Microsoft ruling would engender was hard to pinpoint at the moment. "I like the sift in the perception this might cause," noted Gassee. "The practical consequences (are) too early to tell," he added. "But in psychological terms, I think this might open doors. I think today's findings of fact will alter everyone's calculus about Microsoft."
The Washington, D.C.-based Software and Information Industry Association hailed Judge Jackson's ruling as a powerful statement in defense of free market competition. "Jackson affirmed that the antitrust laws do apply to the information technology industry, and that anti-competitive behavior is no different than anti-competitive behavior in any other industry," association president Ken Wash said in a statement.
Michael Fenne, founder of Pixelon, said that big companies like Microsoft lacked the drive and energy of smaller companies. Jackson's decision, "bodes well for us, because we are competing with Microsoft and it gives us some hope that no monopolistic practices will be used against us," Fenne said.
What to Expect
The stage is now set for a second ruling from Jackson on whether Microsoft's actions, as established by the judge's finding, actually violated US laws aimed at ensuring fair business competition.
A determination that the company had indeed broken the law would trigger a third legal procedure, during which the court and the Justice Department would craft remedies to eliminate the illegal effects of the Microsoft monopoly.
But the harshness of Jackson's finding of fact suggested to anti-trust lawyers that he was in effect prodding Microsoft and the government to settle out of court.
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US District Court Judge
Thomas Penfield Jackson.
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If Microsoft insists on a legal verdict from Jackson, anti-trust specialist James Brock of Miami University of Ohio believes it will be taking "a very large gamble. That verdict then becomes the foundation for private firms to file their own anti-trust lawsuits against Microsoft," he said. "If Microsoft is held to have illegally monopolized trade, the private lawsuits don't have to re-fight all those battles." In other words, the cases would begin from the premise that Microsoft broke the law, thus focusing on the financial damages that private firms would seek.
Most independent observers suggested that it was in Microsoft's interest to settle the case. The Washington Post said Sunday, "Judge Jackson's ruling seems to us, in the main, a reasonable reading of the evidence -- if one that is sometimes too strident and ungenerous to Microsoft." Jackson's finding should, "jolt the company's resistance to discussing the sort of accommodations that would end the case," the paper said.
The New York Times on Saturday also suggested it was time for Microsoft to throw in the towel. "Microsoft should fight for its rights under the law, but it should also recognize the sweeping nature of the government's victory," the daily said.
Brock said that in selecting remedies Jackson would have two options, one of which would leave the Microsoft monopoly intact while changing the way it treats competitors. "The second general line ... is a structural reorganization, or dissolution, 'trust-busting' in the literal sense," he explained.
Jackson's findings also alarmed segments of the US high tech sector, where there were fears that a legal ruling and sanctions would presage the intrusion of government into the marketplace. "The judge's findings seem to signal the beginning of aggressive regulatory intervention into the high-tech economy and if so it will go down in history as a colossal mistake," argued Jonathan Zuck, president of the Association for Competitive Technology. "It is impossible for anyone to have a permanent, impenetrable lock in this highly dynamic market, let alone predict the future as Judge Jackson has attempted to do."
Criticism also came from prominent Georgetown University law professor Paul Rothstein, who described the government's case as one "based on competitor lobbying and not on consumer law."
What this case has done is put the operations of a computer giant in question. It has resurfaced the prominence of anti-trust laws and has dealt the most recent blow towards a company racing towards the monopolization of a given industry. As has been stated, this will hopefully regulate the dominance of big business and re-establish a place for small businesses not only in the computer industry, but others as well.
There are many pros and cons to this antitrust case against Microsoft. It has the potential to seriously affect the computer software industry. Questions remain as to whether the decision of this case will bring about greater competition in the computer industry or bring it to its demise.
There are several scenarios that could possibly take place. One scenario is that Microsoft would have to produce a version of Windows without its web browser, Internet Explorer. On a greater scale of punishment, Windows could be declared as part of public domain. What this would do is open up unlimited access to Windows to anyone, regardless of their status. Lastly, Microsoft could be broken up into a group of smaller "baby-softs."
With all these varying degrees of punishment out there as ideas, it will be interesting to see how this anti-trust case concludes. So far, positive signs have shown that this case will bring about a new vibrancy in computer software business. However, others say that making Microsoft into a smaller entity or breaking the software giant into several smaller "baby-softs" would severely damage the industry by taking away the diversification of the company. Only time will tell whether these steps will be slight or severe, positive or negative. We will all be waiting to see the results.
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