Microsoft, U.S. Have Everything to Settle For
As the government’s antitrust trial against Microsoft Corp. enters a lengthy recess after 64 days of testimony, experts say the software giant’s near-disastrous defense has made the prospect of a settlement increasingly likely.
The government and Microsoft publicly reject any notion that they are interested in negotiating. But both sides--while vowing to appeal any trial defeat all the way to the U.S. Supreme Court--are under pressure to talk as they confront a crucial month-and-a-half recess during which they will assess their options and prepare for the trial’s end game.
Legal experts and officials close to the government and Microsoft say it is in both parties’ interests to negotiate. It seems increasingly likely, these experts say, that U.S. District Judge Thomas Penfield Jackson will uphold at least some of the government’s antitrust charges--a move that could make the software giant more vulnerable to costly private antitrust lawsuits that could drag on for years.
“This case started because the government wanted more than Microsoft wanted to give . . . but Microsoft may be more willing to talk” now given its poor trial performance, said Harry First, an antitrust professor at New York University Law School.
Even ardent Microsoft supporters--such as University of Virginia economist David E. Mills--say the company has suffered “embarrassing events” in court that could push it to the negotiating table. “It’s always possible that somebody will come up with an exit strategy that will be agreeable,” Mills said, adding that such an outcome would be preferable to a ruling that placed draconian regulatory restrictions on Microsoft.
“I think there’s going to be some kind of compromise because right now the cards look stacked against Microsoft,” said Jonathan Haller, a technology industry expert for Current Analyst, a Sterling, Va., financial consulting firm. “They are going to have to pay a fine or give competitors access to their code and back off on their aggressive industry practices” in order to placate the government.
A string of poor performances by Microsoft executives on the witness stand and other courtroom gaffes has undermined the company’s credibility and has served to distract its lawyers from the main points of their defense.
Microsoft witnesses have retracted statements under cross-examination and withdrew a videotaped demonstration after it was exposed as a not entirely accurate depiction of events. Missteps like these have drawn derisive comments from Jackson.
Jackson himself stepped up pressure on the parties to settle in recent days, offering an allegory last week which he said was unrelated to Microsoft but relevant to “our work” as lawyers. “When you discover you are riding a dead horse,” the judge told a bemused courtroom audience, “the best strategy is to dismount.”
But the parties remain glued to their saddles, not just because of principle, critics say, but also because the government hasn’t reached a consensus on what sanctions it might seek against Microsoft if it wins the case.
Nearly a year ago, Microsoft and the government failed to settle their differences out of court after twice meeting to negotiate. Government negotiators at the time accused Microsoft of using the sessions to get an inside look at the government’s antitrust case. Microsoft, meanwhile, said the government wasn’t sincere about negotiating a fair settlement.
After the talks fell apart, the government--on May 18, 1998--filed the current antitrust suit against Microsoft, the biggest business case to come to federal court since the breakup of the Bell telephone monopoly more than a decade ago.
The Justice Department, 19 states and the District of Columbia government charge that Microsoft--whose flagship Windows operating system software runs more than 90% of the world’s personal computers--has used its software dominance to thwart competitors.
The government has levied three basic charges against Microsoft: that the software giant has a monopoly over PC operating systems; that the company has illegally used its alleged monopoly power to thwart rivals offering Internet software like Web browsers and multimedia applications; and that, as a result, consumers have been hurt because they have fewer software choices.
In making its case, the government has focused on a disputed June 21, 1995, meeting between executives of Microsoft and Internet software developer Netscape Communications Corp. The government contends Microsoft sought to team up with its rival as part of a proposed scheme to illegally divide the market for Internet software. Microsoft said that was not its aim and that, in any event, no such deal was ever struck. But the government has sought to portray the meetings as evidence of Microsoft’s alleged anti-competitive conduct.
Web browsers have become a nearly indispensable part of computing since Netscape popularized the navigational software in the mid-1990s. But Netscape lost nearly 50% of its browser market share to Microsoft during the last three years after Microsoft decided in 1995 to give away its Internet Explorer Web browser for free.
Microsoft representatives contend the government has failed to prove any of its charges.
“I think the trial has gone very well for us,” said lead Microsoft trial lawyer John L. Warden. “I think the government has failed to make its case.”
But lead government trial lawyer David Boies told reporters Friday that the government has been able to make its case out of the mouths of Microsoft’s own witnesses.
“Whether you think their witnesses are credible or noncredible . . . they’ve admitted monopoly power, they’ve admitted the absence of competitive constraints, they’ve admitted raising prices to hurt consumers, they’ve admitted depriving consumers of choice, and they’ve admitted that the reason that they did that was because they were afraid that consumers would in their view make the wrong choice, which is the non-Microsoft choice.”
Microsoft officials complain that the government seems to have a commanding trial lead only because the news media have conveyed a distorted account of the courtroom proceedings. They say the media have focused more on the courtroom theatrics of Boies, who has successfully--in some cases--challenged the credibility of several Microsoft experts, than on the documentary evidence.
Jackson recessed the case on Friday in order to hear a pressing criminal trial on his calendar. When the antitrust trial resumes sometime in the latter part of April, Jackson could hear from as many as six more Microsoft and government rebuttal witnesses before issuing a decision.
Neither side has announced its lineup of rebuttal witnesses. Legal observers say the testimony of the rebuttal witnesses could make or break the antitrust case. Although it’s considered a longshot, Microsoft has not ruled out putting Chairman Bill Gates on the stand.
* MICROSOFT TRIAL SUMMARY
A look back at the testimony of 24 witnesses in the landmark antitrust case. C4
