Has Microsoft's defence run out of ideas?
The AOL-Netscape gambit clearly isn't working
MS on Trial "One of the things I committed to when I took on this job was to go back to court, to not take 60 cents on the dollar to settle for a consent decree." So said Joel Klein, the Department of Justice's antitrust chief, dropping a hint about his attitude to any attempt by Microsoft to try for a weak consent decree again. Klein was speaking at a conference on antitrust in high-tech industries. He also seems determined to maintain what he described as a "pragmatic position" with respect to antitrust enforcement, compared with over-utilisation in the 1960s and under-utilisation in the Reagan years. Klein's particular concern was to focus on market power: "how you get it, and how you keep it." This will be bad news for Microsoft. AOL CEO Steve Case was deposed on Friday for nearly three hours. John Warden for Microsoft made no more progress than he did when he failed to ask logical follow-up questions about AOL VP David Colburn's answers to his cross-examination questions. Had Warden been more astute then, he might have found out that some kind of deal between AOL and Netscape was pending. Case confirmed that AOL general counsel George Vrandenberg (also called a "lobbyist" by the WSJ) has told DoJ special trial counsel David Boies that AOL was having some delicate negotiations with Netscape, but no detail was disclosed. The purpose of the disclosure was to warn Boies that lines of questioning could arise where AOL would be unable to answer. Had this happened, there was a possibility that AOL could have been accused of running up its share price. In the event, Boies would have had to object, and speak to the judge privately about the reason. AOL, and the DoJ's concern, would be the probability that Microsoft might accidentally leak the information, even if the evidence were in camera, and by accident scupper the deal. Warden naively asked why AOL tried to keep the merger with Netscape a secret, which showed either an astonishing degree of legal ignorance, or a complete misjudgement of the calibre of the witness and how likely it was he would fall into such a simple trap. Warden had only two main lines of questioning. The first concerned Microsoft's attempt to show that Navigator was tough competition and that it was AOL's intention to use it to compete with IE. Case had already said in an interview with the Washington Post that this was not the case, and he didn't change his stance one jot during the deposition. Indeed, Warden made it worse for Microsoft because he allowed Case the opportunity to point out that AOL was relying on the continuation of Windows for its business plans, and had no intention of competing. "We did not buy Netscape because of the browser business," he said. "We bought Netscape in some ways despite the browser business." Case also said that although new devices will emerge (and Microsoft is raising this canard with its dwindling band of sympathisers), they will not be a major challenge to Windows. The wounded Warden then limped to his second line: AOL's interest in the high-speed Internet access infrastructure. Warden's ace question, quite incapable of being answered, even if Warden understood it, was: "How much of your market capitalisation depends on the idea that people are spending more of their computer time online?" Warden was doing a good job of winning the case for the DoJ. He also asked about whether high-speed Internet access would allow the use of non-Windows software. Case asked rhetorically: "Am I in the right room?" Warden failed to make any headway that showed that Microsoft faced increased competition in operating systems software. Boies had little to ask Case, and said most of it with body language during Warden's questions, spending a fair time examining the ceiling of the Grand Hyatt Hotel in Washington, and massaging his chin. Contrary to some reports, Microsoft does not have a new line of defence as a result of this deposition. If anything, it has shown that it has run out of ideas and is marking time until Judge Jackson finds for the government. It was the government that was hurt, rather than Microsoft, by there being no earlier merger disclosure, Boies maintained. Had it been brought up at the time, the DoJ could have shown that it did not have relevance. "I think it's a sideshow, an effort to detract from what the real issues are," Boies said, after the stumps had been drawn. ® Complete Register trial coverage
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