Microsoft rebuts antitrust charges

Software giant argues in U.S. court to avert any breakup

`Clearly within the law'

January 19, 2000|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- Microsoft Corp., trying to head off government efforts to split it into two, three or more new companies, asked a federal judge yesterday to rule that it has broken no federal or state law.

In a lengthy filing in the antitrust lawsuit brought by the Justice Department, 19 states and the District of Columbia, the beleaguered software giant said everything it has done toward its competitors has an innocent explanation.

"Microsoft's actions may have been aggressive -- but they were clearly within the law," the company said.

Although the 20-month antitrust battle shows no sign of wavering, the case could end at any point with an out-of-court settlement. A federal appeals judge, Richard A. Posner of Chicago, is overseeing settlement talks.

Microsoft's filing sought to rebut claims last month by the Clinton administration and the states that Microsoft has repeatedly, and intentionally, violated the Sherman Act -- the nation's basic, 110-year-old antitrust law -- as well as more than a score of state laws.

It insisted that it is not powerful enough to have set up or to maintain a monopoly.

While acknowledging the popularity of its operating systems that are the brains of most of the nation's personal computers, the company argued, "Microsoft does not possess the power unilaterally to raise prices in or exclude competition from the operating system business."

Microsoft made no mention of the widely circulated report that the federal and state governments are close to agreeing on a demand that the company be divided up.

A splintered company supposedly would be easier for rivals to challenge, thus bringing more competition in the creation of new computer software and wider options for browsing the Internet.

Earlier, Microsoft had denounced the breakup suggestion as "an extreme and radical proposal that is not justified by anything in this case."

In one important sense, talk of a breakup is premature. No court-ordered alteration of Microsoft, or of its business practices, would be necessary unless U.S. District Judge Thomas Penfield Jackson first found that the company had actually violated the law -- and Jackson has not done that yet.

In fact, the judge has expressly ruled out, in court documents up to this point, any discussion of a potential remedy. Remedy issues would arise as the next phase of the case, but only if the judge sides with the views of the federal government and the states.

In November, Jackson issued his conclusions about what has been happening as Microsoft moved to dominance in the software industry. The judge said he had "the suspicion" that Microsoft was aiming at "a future in which most or all of the content available on the World Wide Web would be accessible only" through Microsoft's software.

Most observers believed that those findings were so negative about Microsoft's behavior that they telegraphed a conclusion that the company is and has been a lawbreaking monopolist.

The company went to great lengths yesterday to try to dispel that expectation. Although it expressly said it disagreed with many of Jackson's factual findings, the company said that, even if it accepted all of them as true, they do not add up to anything unlawful.

Its lengthier document, 70 pages long, was a reply to the broadest claims of illegal conduct under the federal Sherman Act. In a much shorter document, Microsoft answered the specific claims by Maryland and other states claiming that the company had violated state laws, too.

The company fired its own accusation at the states, complaining that they are violating its civil rights, by trying to interfere with its rights under federal law to design and sell software under the full protection of copyrights.

In refuting the federal challenges, Microsoft argued that it has not artificially linked its widely used Windows operating system with its Internet Explorer browser in an attempt to control access to the Internet.

The lawsuit contends Microsoft linked the Windows system and the Internet Explorer in order to kill off Explorer's chief browser rival, Netscape Navigator.

In fact, Microsoft said, it has already won a federal appeals court ruling that Windows and Explorer are part of a single product, and its antitrust challengers are ignoring that that.

Microsoft's pushing of the Windows-Explorer package, it said, was designed solely to stop Netscape Navigator from becoming the browser of choice, and that is "well short" of an attempted monopoly over browsers.

The company also strenuously rejected the argument that it has been acting illegally by refusing to let computer manufacturers modify the way Windows looks when it first pops up on a computer screen.

All that it was doing by demanding veto power before any manufacturer could alter that screen image, it said, was protecting its copyrighted product. That is not illegal, but in fact is encouraged by the law, it said.

Much of the new filing attempted to show that the one area where Microsoft clearly dominates -- designing and selling operating systems for the most widely used kind of personal computers -- is not a big enough market by itself to sustain a monopoly.

Many other companies, the Microsoft argued, are capable of offering different operating systems to the public and posing major competitive challenges.

If it had no chance to monopolize a market, its resistance to competitive pressures was entirely legal business behavior, the Redmond, Wash., company said.

The case's schedule from here, assuming no settlement, will unfold this way: The Justice Department and the states will file replies next Monday to Microsoft's proposed legal findings, and Microsoft will have one more chance to argue its legal defense in a filing Jan. 31. Jackson will hold a hearing next month before moving toward legal conclusions of his own.

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