Officials May Drop Microsoft Tying Issue
Antitrust officials are considering dropping a key part of their lawsuit against Microsoft Corp. in hopes of getting a speedier resolution to the landmark case.
Last month, the U.S. Court of Appeals for the District of Columbia Circuit agreed with the Justice Department and 18 states that some of Microsoft’s practices violated federal antitrust laws, but it threw out the remedy--that Microsoft be split into two companies.
The appeals court also sent back to a lower court the question of whether Microsoft’s bundling of its Internet Explorer Web browser and its Windows operating system violated an antitrust law that bans some tying of unrelated products.
Now government officials are mulling over whether they should abandon the tying issue so that they can move more quickly to hearings on how to punish Microsoft for using anti-competitive practices to illegally maintain its monopoly on desktop computer systems.
“It is very actively under consideration as an issue of strategy,” said Connecticut Atty. Gen. Richard Blumenthal, one of the most active state officials in the case. “Everything is under consideration. I can’t talk about strategy.”
Immediately after the appeals court ruling, Blumenthal and other Microsoft foes said the tying issue was very much alive and important to resolve. They said new hearings could determine the fate of Microsoft’s upcoming Windows XP operating system, which weaves in the software for several other products, such as instant messaging and a media player for music and videos.
But after studying the appeals court ruling, some government officials and several outside legal experts believe the government has enough grounds for a forceful remedy without proving improper tying.
Pressing the tying claim would be time-consuming and redundant and might not lead to a harsher penalty even if the government won, they said.
“The government already got what it wanted,” said Steve Houck, an antitrust attorney in New York who worked on the case for that state’s attorney general. Retrying the tying claim “doesn’t add much and may not be worth it.”
Houck noted that the appeals court already ruled that Microsoft’s bundling of its Web browser and its Windows operating system violated the Sherman Antitrust Act.
Proving that the bundling violated the Sherman Act--which would be the issue of the new trial--is “an interesting theoretical question” but isn’t critical to the case, Houck said.
In addition, under the tougher new standard set by the appeals court, the government could have a difficult time proving the tying violation.
“The restrictions that the court put on are so severe it would be impossible to win,” said Herbert Hovenkamp, a University of Iowa law professor whose work has been cited by the government in the Microsoft case. “The payoff is minimal. So the rational thing is not to pursue it.”
Justice Department officials said only that they are evaluating their options.
Microsoft declined to comment.
This week, Microsoft asked the appeals court to reverse a related finding that Microsoft’s commingling of the software code for its browser and operating system violated the law. The company is worried that the commingling ruling could affect Windows XP, possibly delaying the product’s October launch.
On Thursday, the appeals court gave government attorneys until Aug. 3 to respond to Microsoft’s motion for rehearing. Experts say the court is unlikely to reconsider its ruling.
A retreat by the government on the tying issue might open the Bush administration to criticism that it is letting Microsoft off the hook, and it could face opposition from some states that have joined the case.
“To the extent Microsoft continues to insist it is free to bundle products however it wishes, the government has an important interest in establishing the tying claim,” said Lawrence Lessig, a Stanford law professor who has been involved in the case.
Sun Microsystems Inc. attorney Kevin Arquit said Windows XP takes bundling to a new level. “It’s got photography, video, telephony and instant messaging,” Arquit said. “You’re going to see competition dry up the same way it did in the browser market.”
But Houck said a new hearing on the tying claim could take months. The government’s stronger interest, he said, is moving as quickly as possible to deciding what sort of punishment Microsoft should face.
And that relief could be severe, including the possibility of a new breakup order. The appeals court said any solution should “terminate the illegal monopoly.”
“The more important thing is to get the relief the government is seeking,” Houck said.
