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MS fights back: DoJ ‘rewriting law to protect competitors’

Desperate, audacious stuff...

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MS on Trial Had there been a different set of facts on which to base the arguments, Microsoft would be well on the way to winning the case, judging by the arguments in the Sur-reply, as it's called, to the DoJ's and States' Joint Reply of last week about proposed findings of law. The brief is head-and-shoulders above the pedestrian amicus effort of the ACT, using audacious arguments that are sometimes breathtaking in their ingenuity. But all syllogisms require the premises to be true, and that is the fundamental failing of the brief. Microsoft kicks off with an attack on the DoJ's barbed remarks about "strawmen" and "out-of-context passages from decisions involving patently different market circumstances", but ignores the fact that this happens in an Introduction where a little rhetoric goes a long way, before the gloves are off as it were, and before the business of legal citation starts. Microsoft huffs and puffs in its own preliminary statement, suggesting that: "This Court should decline plaintiffs' invitation to rewrite the antitrust laws to protect Microsoft's competitors at the expense of consumers". That's audacious, you see. The arguments are solidly made, and Microsoft's lawyers squeeze the juice out of their case until you can hear the pips squeaking: but in the end, there's just not enough juice. The canards - such as "Windows 98 is a single, integrated product" - may just appeal still to the very faithful, but after the evidence, it's an impossible case to make convincingly. Microsoft uses as its main pleading the Court of Appeals' findings about the Windows 95-IE tying, but it looks increasingly unlikely that if there were an appeal, the DoJ would allow itself to be pushed around again by an appellate court that is well-recognised to be pro-monopoly. The alternative would be for the DoJ to use its powers to have the case offered to the Supreme Court directly. It is a rather desperate argument to claim that there can be no tying because IE has no price so nobody could "pay" for it. The zero price was evidence of predatory pricing, and Microsoft's clear intention was to put Netscape out of business by cutting off "Netscape's air supply". Microsoft tries to make the case that in any event, the DoJ did not establish foreclosure of 40 per cent of Netscape's market, but this depends on how you read the data, and whether you accept the trend projection. Of course Microsoft can claim that it "did not act with a specific intent to monopolise Web browsing software" or "There is no dangerous probability that Microsoft will obtain monopoly power in Web browsing software", but the facts do not generally support these assertions. Even Microsoft occasionally feels the need to insert a softening word, for example when it is making a claim that: "Microsoft did not engage in anticompetitive conduct that contributed significantly to the maintenance of a monopoly." It is the "significantly" that is rather unexpected. Microsoft decided to persevere with its plea that it is not a monopoly, although the Amici had already put Microsoft down as a monopoly and were arguing that this was OK because Microsoft acquired the monopoly legally. A pricing argument that does not easily withstand scrutiny is Microsoft's assertion that "Microsoft does not have the power to control prices or exclude competition in the relevant market". It becomes a value judgement when Microsoft claims that "Microsoft's so-called 'binding of Internet Explorer to Windows' was not anticompetitive because it resulted in improvements to the operating system", but the penalties do seem worse than the supposed benefits. It is clear that Microsoft is on thin ice over pricing, and so it "vigorously disputes" the contention that the IE tying satisfies a "below-cost requirement" of a cited case. Judge Jackson's assertion that middleware was the "most serious competitive threat to Microsoft's operating systems" is somewhat faulty as the relevant market would exclude what the judge was calling middleware. Microsoft bravely has another go at copyright arguments, but has nothing particularly new to say, except the observation that it may "unilaterally refuse to grant OEMs the right to make unauthorised modifications to Windows without running afoul of the antitrust laws." However, a lapse in the quality of Microsoft's argument is seen when it chides the DoJ for failing to challenge its copyrights for Windows 9x - an argument that is not likely to endear it to the court. A recurring vice is that Microsoft does not discuss earlier situations and wishes to be judged on the present circumstances only. There is no doubt about Microsoft's potential liability for its earlier acts, so defences based on Microsoft's agreement that OEMs may now modify the Windows boot sequence in certain limited ways, or the quiet nod that Microsoft gave Compaq that it could load Navigator from January 1999, cannot negate any earlier sins. A footnote says that Microsoft focuses on Windows 98 because "that is the product of current significance". The main new line is an important one, to do with "monopoly broth": Microsoft argues that the antitrust argument that it's the behaviour "when considered as a whole" that determines the guilt or innocence "has been largely discredited". Microsoft cites for support the Intergraph case in which the Federal Circuit said that each theory of antitrust liability must be considered separately based on all the evidence, and that it would not allow "the degrees of support for each legal theory" to be added up. The present case is legally very important. It has been characterised by some new legal issues, or issues that are more acute in this case than in any preceding ones. The most obvious is faster product evolution: appellate court arguments about Windows 95 are not necessarily valid for Windows 98. Furthermore, many precedents have only marginal relevance in a high technology case, where legal generalisations for the steam age do not fit easily. There is of course a dearth of really relevant precedents, so Judge Jackson will probably find that his judgement is much quoted in the future. The US has in recent years become very political about its attitudes to antitrust, with the right being commonly aligned against government interference and antitrust, and the left for it. But there has been a breaking of ranks as it becomes realised that it is not a left-right issue, but one of right and wrong - and that each case has to be considered as a whole. This is bad news for Microsoft, because when it comes to a judgement about intentions towards competitors, Microsoft's actions speak very eloquently. ®

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