Justice Department Appeals Microsoft Ruling : Courts: The software company will join the government’s effort to reinstate their antitrust settlement.
Declaring that the separation of powers is at stake, a defiant Atty. Gen. Janet Reno on Thursday appealed a federal judge’s startling rejection of the Justice Department’s antitrust settlement with software giant Microsoft Corp.
“We found and brought the case we believed to be supported by the evidence,” Reno said. She added that U.S. District Judge Stanley Sporkin’s rejection of the settlement threatens to eviscerate the government’s ability to enter into any kind of antitrust settlement, and that the department is thus seeking an expedited review by the Court of Appeals.
Immediately following the Justice Department announcement, Microsoft said it would join in the appeal--thus creating the incongruous image of the two adversaries in a major antitrust case joining together to oppose a federal judge. The settlement was agreed to last July after a 4 1/2-year investigation of allegedly anti-competitive business practices by Microsoft, the world’s largest software company.
The appeal sets the stage for a novel and contentious examination of how much leeway judges are permitted in examining consent decrees under the Tunney Act, a federal statute that mandates judicial review of Justice Department settlements to determine if they are in the public interest. The law was enacted 19 years ago after complaints arose that the Justice Department was not seeking tough enough settlements with some defendants.
Since the law was passed, no one can recall an instance when a federal judge rejected a settlement--though in the landmark AT&T; case, Judge Harold Greene did insist on certain modifications to a consent decree. But Sporkin, in a 45-page opinion issued late Tuesday, concluded that the proposed Microsoft decree failed to remedy the company’s alleged past “anti-competitive practices” or its near-monopoly over the software that controls the basic functions of computers.
“Microsoft is a company that has a monopolistic position in a field that is central to this country’s well-being, not only for the balance of this century, but also for the 21st Century,” Sporkin wrote.
“The picture that emerges from these proceedings is that the U.S. government is either incapable or unwilling to deal effectively with a potential threat to this nation’s economic well-being,” he wrote.
But in its notice of appeal, the Justice Department said Sporkin’s actions are “unprecedented in the history of the Tunney Act” and that his ruling “threatens the ongoing enforcement program of the Antitrust Division.”
The department contends that Sporkin is, in effect, trying to assume the role of prosecutor in the case, raising issues that the government had concluded did not constitute provable antitrust violations.
“What the judge did is look at other practices not alleged in the complaint,” Reno said. “For the judge to intrude into the prosecutor’s work crosses over the line between the judicial and the executive branch.”
If the ruling is upheld, the Justice Department said, companies will be reluctant to enter settlements because they wouldn’t be able to count on the deal holding up.
Many observers of the case expected the Justice Department to appeal and said they believe the government has a strong case.
Lawrence Crocker, a New York lawyer who helped defend IBM against a Justice Department investigation of the firm in the 1970s, said the ruling will be overturned because Sporkin “went far beyond the scope of this consent decree.”
On another front, Justice officials refused to say how the appeal of the consent decree might affect the agency’s review of Microsoft’s pending $1.5-billion purchase of Intuit Inc., the largest personal finance software company and a potential gateway for Microsoft to enter the huge home banking industry.
“The Microsoft’s the same, but Intuit had nothing to do with this previous case,” said antitrust chief Anne K. Bingaman, who sat by Reno’s side at Thursday’s news conference. “So we take these things a case at a time, a fact at a time, an allegation at a time, and that’s a different case.”
The consent decree would have barred Microsoft from using volume software licensing agreements to prevent computer manufacturers from installing rival operating software systems in the computers they sell.
Despite the uproar in Washington, there were no new misgivings across the Atlantic, where the European Commission last summer made a parallel antitrust agreement with Microsoft. That agreement will stand.
