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Microsoft Fights Back

Now it's the company's turn to tell it to the judge

By Jared Sandberg

This week, the government is expected to finish the first phase of its antitrust case against Microsoft, and, for the first time, the software giant will have a chance to fight back with witnesses of its own. How do Bill Gates & Co. plan to parry the months of damaging testimony, e-mails and excerpts from what has become antitrust porn—the infamous Gates video? Some defenses Microsoft will likely make to key charges:

Microsoft used its operating-system dominance to bully competitors. The government charges that the company leveraged its monopoly in one area to unfairly enter other businesses. Microsoft will dispute it has a monopoly, arguing that the software industry is a cutthroat business where today's industry leaders can be tomorrow's carcasses. The company's witnesses will testify that, if it didn't compete so militantly, it would fast become the "buggy-whip manufacturer of yesterday," says Prof. Ernest Gellhorn of George Mason University. Much of the company's defense, he adds, is that "none of these practices hurt anybody and all were necessary to its survival." Microsoft will have to convince the judge that incidents the government cited as illegal monopolistic arm-twisting were "legitimate efforts to develop a better product," says William Kovacic, antitrust professor at George Washington University Law School.

Microsoft illegally tied its browser to Windows. The government argued that consumers don't benefit and there are technological disadvantages. Microsoft will contend the opposite—that consumers welcome Internet features at their fingertips. And the company is sure to use legal precedents that support such integration, including a court of appeals ruling last summer that effectively said courts should steer clear of software development.

Microsoft preyed on competitors. Justice says the company "sabotaged" an Apple software product, stiff-armed Intel out of competing markets and attacked Sun Microsystem's Java language by producing an alternate version. Along with disputing the facts of these charges, Microsoft will argue that such allegations have no bearing on the government's central antitrust claim. "All of this is obviously mudslinging and at some point you've got to get the hose out and get the mud off," said one Microsoft lawyer.

Microsoft forced exclusionary contracts to block the distribution of rival products. Justice says many high-tech companies were kept from actively promoting Netscape's browser. Microsoft has argued that its browser was chosen for its superiority, but most antitrust observers think the company will have a hard time defending itself. "It's hard to see why Microsoft needed to include these exclusionary provisions if they were going to compete on the merits," says Carl Shapiro, economics professor at UC Berkeley. So long as Netscape has the ability to distribute its products, Microsoft will argue, there's nothing illegal about exclusive contracts. And many of the contracts in question have expired.

Microsoft tried to collude with rivals. The government charges that Microsoft invited competitors to divide markets, citing meetings with Netscape and Apple in which Microsoft allegedly carved out parts of the industry for itself. Microsoft, using a battery of company executives, will narrate a different account of those encounters. Besides, Microsoft lawyers say, even if the government's version of the Netscape meeting were true, "an invitation to collude isn't illegal. Collusion is illegal." In other words, Microsoft charges, the government is guilty of illusion.

Newsweek, January 18, 1999