Microsoft Judge Looks at Rivals’ Merger

The judge who will decide the Microsoft Corp. antitrust case interrupted the trial Wednesday to ask a witness about comments by America Online Inc.’s chairman that its planned deal with Netscape won’t change Microsoft’s dominance.

The unusual exchange was a clear illustration of the judge’s deep unease about how the pending $4.2-billion AOL-Netscape merger might affect the competitiveness of the nation’s computer industry, the main issue in the trial.

Microsoft argues that the deal, announced in November weeks into the Microsoft trial, illustrates that the computer industry remains viable and thus suggests that government intervention isn’t needed to ensure competition.

But in an interview published Wednesday in the Washington Post, AOL Chairman Steve Case said: “AOL’s merger with Netscape has no bearing on the Microsoft case. . . . I have a lot of respect for Microsoft. I continue to live in fear of them.”

At the time of the judge’s questions, a Microsoft lawyer was questioning the government’s final witness about AOL’s purchase of Netscape, which sells browser software that competes directly with Microsoft’s Windows to let people view information on the Internet.

The government alleges that, starting in mid-1995, Microsoft sought to crush Netscape by using illegal business tactics, in part because it feared the popular browser software might one day displace the importance of its Windows operating system.

On Wednesday, Justice Department lawyer David Boies called the potential deal’s impact on the antitrust case a “red herring.”

AOL is the world’s largest Internet provider with more than 15 million subscribers. So a decision by AOL to distribute Netscape’s browser software could dramatically boost Netscape’s now-flagging popularity.

“It will have some relevance,” said economist Franklin Fisher of the Massachusetts Institute of Technology, the witness, who called the deal a “hopeful sign” of renewed competition. But he said: “It won’t have changed the fact that Microsoft took actions to reduce the threat from Netscape’s browser.”

U.S. District Judge Thomas Penfield Jackson interrupted the questioning, saying he had read Case’s comments, and then briefly recessed the trial to find a copy of the article.

“The thrust of the article is that there is no indication that the new consortium is going to compete against Microsoft,” the judge said.

“The question I have of you is . . . is this consistent with your understanding of what the impact of the consortium will be, insofar as developing viable competition?” the judge asked.

Fisher replied: “It certainly is.”