Forget the O J Simpson trial, over at the PowerPC News office it is the US Justice Department versus Microsoft Corp that is keeping us glued to our terminals. US District Judge Stanley Sporkin has dramatically re-opened the case which most people thought closed – much to the dismay of the Justice Department. Meanwhile Microsoft chief executive Bill Gates’ most recent column, syndicated by the New York Times, looks like a veiled threat to re-locate Microsoft overseas if the company is tampered with. By rights this is a case that should be over. Dead. Finished. For the past five years the US government, in the shape of first the Federal Trade Commission, and latterly the Department of Justice, has been trying to decide whether Microsoft is abusing its dominant position in an anti-competitive way.
slap on the wrist
You may remember last July, the case seemed settled. The joint Justice Department-European Commission, investigation concluded in what was widely seen as a mild slap on the wrist for the company. Microsoft was told to stop its practice of levying ‘per-processor’ fees, whereby companies were forced to pay Microsoft a Windows licence fee for every machine they shipped, even if only a few of them were actually pre-loaded with the operating system. The ruling also outlawed minimum purchases that could force hardware manufacturers into buying more Microsoft products than required; stopped Microsoft forbidding independent software vendors from simultaneously developing applications for Microsoft and other operating systems (Microsoft allegedly used non-disclosure agreements for this purpose); and stopped Microsoft from linking operating system sales to sales of its applications. Gates appeared ebullient about the result, telling journalists that the resolution of the anti-trust case would have no ma terial impact on the coming year’s revenues and that no internal forecasts had been changed for Windows or MS-DOS sales. But then last month, there was an unexpected hitch. The final consent decree went before Judge Sporkin to be rubber-stamped – but he refused to stamp it. The judge had been presented with three last-minute objections to the decree: one from the US Computer & Communications Industry Association; one from a San Jose, California-based law firm, called Wilson, Sonsini, Goodrich & Rosati – acting on behalf of an anonymous group of information technology companies; and one from a small Massachusetts-based manufacturer, IDE. The complainants argue that the decree ignores many of the original issues raised by the investigation. Where, they ask, is the requested action to stop Microsoft’s application developers getting preferential access to information on operating system internals? Where is action on the claim that Microsoft deliberately pre-announces products to hurt its competitors? The Wilson Sonsini brief summarises the allegedly unaddressed misdemeanours thus: undocumented calls; early disclosure of operating systems information to Microsoft’s own applications engineers; predatory pre-announcements; predatory bundling and unbundling of operations and applications functionality; restrictive licensing practices; and the use of subsidised pricing to leverage into the applications market using monopoly profits from operating systems. They want the consent decree to go much further, perhaps even as far as splitting Microsoft into completely separate companies, one for applications, one for operating systems. The hearing resulted in the kind of court-room drama usually confined to television mini-series. Reuter’s reporter quoted Sporkin as saying that he did not want to look like a fool in blindly approving something, adding later: I can’t size up this company, I can’t size up this decree. The judge reserved particular vitriol for Microsoft attorney Richard Urowsky. After discussing whether Microsoft has a policy of deliberately pre-announcing software to deter competitors, Sporkin accused Urowsky of misleading an earlier hearing, You can stand on your head, I cannot accept your word any
more. You have just lost your credibility. None of this went down well with Assistant Attorney General Anne Bingaman, one of the architects of the consent decree.
By Chris Rose
Arguing that her team had cut the best deal they could, she questioned Sporkin’s right to take last-minute complaints on board. Your honour, this is wrong, you know this is wrong under the law, she said. Faced with Sporkin’s repeated questioning of the settlement, she pointed out I’m the prosecutor – you’re the judge. She said that if the decree is rejected, the Department will be forced into another court action that would last for years, and would jeopardise the gains made this time around. Exactly what leeway Sporkin has to amend the final decree is unclear. Those behind its original formulation say he is restricted to a relatively simple choice – accept it or reject it. The complainants’ lawyers, on the other hand, argue that the law gives him considerable flexibility. He can, they say, take more testimony, examine more documentary materials, appoint a court expert or take other such action in the public interest. Wilson, Sonsini et al propose two courses of action: that a selection of key Microsoft internal documents, reviewed by the government, should be passed to the court for review which should answer questions regarding Microsoft’s intent and use of various illegal practices; the government should be required to submit affidavits from its economic experts, giving a detailed analysis of how they think the operating system and application market will look in five years’ time. What happens now is up to the Judge, who obviously felt he should be more than a rubber stamp. No doubt the other big Justice Department investigation, into Microsoft’s plan to buy Intuit was also on his mind. The Department is said to be seeking to determine whether purchase of the personal-finance software company would give Microsoft a stranglehold on on-line banking and purchases. And where is Microsoft in all this? We asked if it had any particular statements to make about the anti-trust decree and Sporkin’s concerns – the answer was no. It said it stood by the original July decision, adding, sotto voce, that it saw the current dispute as being more between the Justice Department and the Judge. Now it is disappointed. But Microsoft Kremlin watchers were struck by Bill Gates’s new newspaper column, for the latest one could easily be read as a protest against the way Microsoft has been treated and a threat to take it elsewhere. The first column was an inoffensive homily on aspects of the computer industry. On one level, the second one was the same, an explanation of how US intellectual property laws fostered the growth of the micro software industry, but how this pre-eminence could not be presumed upon. On another level, it could be interpreted quite differently. Gates points out that the US success in software is not God-given, that there are good programmers everywhere and that the micro software business sprang up from small entrepreneurs willing to risk everything.
Detests the monopolist
He continued, Nor did it result from deliberate government policies. There were not special tax credits. There were not regulations aimed at managing competition or imposing standards. This proved to be fortunate. Committees and regulators can’t make decisions as effectively as a truly competitive marketplace. Gates sees the success of such software companies as part of the American dream. Americans are gamblers. Venture capitalists lay down millions of dollars on long-shots… Americans also gamble with their careers. Talented people quit secure jobs to pursue visions or join tiny companies with big ideas. American culture celebrates those who try hard, even when they fail, and gutsy attitudes like these helped ignite the market for personal computer software. Having laid out the benefits of the traditional, unregulated US free market, he warned, The advantage of being in the North American market is fading. The global
marketplace is replacing the US marketplace as the one that really matters. Networks are the key, he says, making it easy for firms anywhere in the world to compete on an equal footing. It is no wonder if Gates feels irked by Microsoft’s treatment – his firm played hard, and maybe a little bit dirty, but it did what every good business should try to do – it capitalised on its strengths, grew big, make lots of money and tried to beat the competition. The trouble is that Microsoft did it too well in the eyes of many and now its success may have become a liability to the US software business. Gates neglects to mention one thing in his column – America may love the entrepreneur, but it detests the monopolist.
