DoJ, states file claims against Microsoft

Claim illegal maintenance of monopoly

MS on Trial The main claim against Microsoft by the DoJ and the plaintiff States in the "Plaintiffs' Joint Proposed Conclusions of Law" is that the company illegally maintained its monopoly. There is every probability that Judge Jackson will agree with this claim. By going for this broad claim, the plaintiffs allow themselves maximum flexibility when it comes to discussing remedies.

Many people may have expected this brief to have been a legal cracker that bristled with righteousness, but although there have been some sharply-worded briefs at times, this sober and somewhat muted document seems to do the job competently. Separately, the plaintiff states issued additional claims under state antitrust and unfair competition laws as a supplement the DoJ joint document.

Kevin O'Connor, assistant Attorney General of Wisconsin, is the lead counsel for the plaintiff States' and undertook the liaison for the DoJ document, with the action being coordinated by the New York State Attorney General's Office.

The DoJ has confined itself to listing four violations of sections one and two of the Sherman Act, which makes its CoL conservative and perhaps more easily defensible on appeal.

The main argument is that Microsoft unlawfully maintained its monopoly in operating systems for PCs - this takes 50 of the 71 pages of argument. The second conclusion is that Microsoft violated section one by unlawfully tying IE to Windows. The third claim, also under section one, is that Microsoft entered into numerous unlawful exclusionary agreements. Finally, the DoJ claims that Microsoft "attempted to monopolise the browser market" (citing section two) since as we suggested yesterday, the evidence was not presented that it had reached the normally accepted legal monopoly level.

It was not a difficult job for the DoJ to produce this document because the Findings of Fact provided the basis for it. All the DoJ had to do was to decide how tough to be in terms of what legal violations it would claim, and to cite the case law that was relevant (some 96 cases, not an unduly large number so far as these things go). It is noteworthy that Jeffrey Blattner is credited as the special counsel for information technology.

The core of the main argument is that Microsoft has monopoly power in the Intel-compatible market; that it engaged in anticompetitive, exclusionary and predatory acts to maintain its monopoly and stifle Netscape and Java, thereby erecting obstacles to consumer choice and impairing it; that it used pressure to keep Netscape out of platform development; and that it used exclusionary actions against PC manufacturers, Internet access and online service providers, content providers, software vendors, and Apple.

In addition Microsoft was spending and foregoing revenue to build IE usage and protect the applications barrier. Microsoft is also accused of taking anticompetitive actions to interfere with the distribution and development of cross-platform Java. More generally, Microsoft conducted a campaign to impede cross-platform middleware.

It is curious that Judge Jackson has further broadened the meaning of 'middleware', which was already a somewhat vague term. The unlawful tying claim says that operating systems and browsers are separate products. The DoJ also claims that a rule of reason analysis condemns the tying arrangements because Microsoft forced users to take a bundle, and did not offer an option.

The section one claim about unlawful exclusionary agreements says that Microsoft brought about a restraint of trade in the operating system and browser markets. Attempts to monopolise are illegal under section 2, and the DoJ's claim easily follows from Judge Jackson's findings, particularly when he wrote that Microsoft deliberately "set out to maximise Internet Explorer's share of browser usage at Navigator's expense".

The DoJ says that "Microsoft may plan to keep the consumer price of Internet Explorer at zero and may have sought browser monopoly power for the purpose of protecting its Windows monopoly. Neither of those facts, however, alters either the predatory nature of Microsoft's acts or its specific intent to acquire monopoly power over browsers. Microsoft clearly sought the ability to control the pace and type of innovation from competitors that might attract more users; that itself is enough for monopoly power".

The DoJ concludes that the "Court's findings establish the dangerous probability that, unimpeded, Microsoft's browser war would achieve the monopoly that Section 2 condemns." The DoJ cites a case where more than a 50 per cent market share was judged sufficient to prove a monopoly in the market, and the evidence showed that Microsoft had achieved 60 per cent IE with new PCs and 50 per cent in the installed base. The DoJ asks the court to "conclude that Microsoft has violated Sections 1 and 2 of the Sherman Act and proceed to consider the appropriate remedy".

The States' Memorandum and Proposed Conclusions of Law is a mapping of state law to federal law for each of the plaintiff states. State antitrust laws are based on the federal antitrust laws. Following the withdrawal of South Carolina, the 20 states involved are: California, Connecticut, DC, Florida, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, New Mexico, New York, North Carolina, Ohio, Utah, West Virginia, and Wisconsin.

The absence of Texas results from a strong lobbying campaign by Microsoft supporters Dell and Compaq that caused the withdrawal of Texas from the case at the last moment. The contention of the States is that Microsoft's anticompetitive practices have caused or threaten to cause damage to the general welfare and economies of the States. Connecticut law differs a little from other states in that one part of its Antitrust Act has no direct counterpart in federal antitrust law because it is a codification of federal case law.

Another section has as its counterpart section 3 of the Clayton Act, which makes it unlawful to condition an agreement to exclude a competitor. One likely effect of the plaintiff States filing will be to encourage locally-based lawyers to file more class-action suits against Microsoft. For its part, Microsoft spokesman were saying yesterday that they disagreed with the arguments, that Microsoft was pro-consumer and pro-competitive, and that Microsoft wanted to resolve the issues "in a fair and responsible manner". ®

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