RealTime IT News

DOJ Opens Historic Antitrust Case

Documents, internal memos, and Bill Gates' own videotaped testimony show a consistent pattern of using Microsoft's monopoly power in the operating system market to threaten competitors, the Justice Department argued in its opening statement in the historic antitrust case Monday.

Lawyers for the federal government and 20 states began to lay out the case before U.S. District Judge Thomas Penfield Jackson that Microsoft has used illegal tactics to preserve its monopoly position in the operating system market.

In an opening statement, New York Assistant Attorney General Stephen Houck sought to establish Microsoft's monopoly position in the operating system market. Making the case for the Justice Department, attorney David Boies said Microsoft used its power to threaten and require companies to agree to carry Microsoft's browser, Internet Explorer.

The government's lawyers directly attacked the credibility of Microsoft founder Bill Gates by contrasting his videotaped deposition in August with e-mail and memos written by Gates years earlier. Gates' video testimony was played on monitors around the courtroom that included Gates' statements he wasn't involved in preparing for a crucial June 21, 1995 meeting between Microsoft and Netscape.

Gates said he "had no sense of what Netscape was doing." But Boies presented May 1995 memos from Gates that described Netscape as a new competitor and suggested that there was a powerful deal Microsoft could do with Netscape.

The government contended that, after Netscape rejected Microsoft's offer, Microsoft used its resources to conquer the market for Netscape's competing browser software.

Microsoft general counsel William Neukom said the government's "out of context snippets and rhetoric" don't even approach descriptions of anticompetitive behavior.

"You did not hear anything that the government hasn't been saying for weeks and in some cases for months," Neukom said. "We have competed vigorously and fairly."

Microsoft attorney John Warden is scheduled to present his opening statement on Tuesday. Netscape CEO Jim Barksdale and Apple Computer Inc.'s Avi Tevanian are scheduled to be the first two witnesses called by the government.

Arguing for the government, Boies also showed charts of the growth of Microsoft's browser share and Netscape's dwindling share, which he said illustrates one impact of Microsoft's conduct. Boies said the browser share charts, which were based on Microsoft's documents, show that 76% of new Internet users are firing up the Internet Explorer browser, and 88% of new users are expected to do so by May. Netscape, by contrast, is relegated to a smaller share of an ever-declining group of early adopters, not new Internet users, Boies said.

Deal making that leveraged Microsoft's monopoly position in the operating system market has led to browser dominance among new users, Boies argued.

Boies also pointed to internal memos from Microsoft and Apple and said they show how Microsoft urged the computer maker to use Internet Explorer. The memos, Boies said, show Microsoft being willing to do "whatever it takes." He quoted from a Feb. 13, 1998 Microsoft memo that describes the production of Mac Office as "the perfect club to use on them" to require Apple to adopt Internet Explorer.

"This is not business as usual, your honor," said Boies, who successfully defended IBM against charges of anticompetitive behavior in the 1970s.

Boies also displayed on an overhead projector memos written by Microsoft chairman Bill Gates about Intel saying, "I don't understand why Intel funds a group that is against Windows 95." Boies said the memos show that what Gates is really saying in the memo is "you cannot fund things that compete with us, or we will retaliate."

Following Monday's proceedings, assistant attorney general Joel Klein, the Justice Department's antitrust chief, said, "We're delighted that the trial has begun, and we're off to a great start."

Klein said consumers will only get the best products if Microsoft's illegal anticompetitive practices are stopped. He said the government intends to show through detailed evidence that Microsoft's illegal deeds match its illegal words.

Ed Black, president of the Computer and Communications Industry Association, said, "I think the Justice Department blew them away." Black said Boies illustrated Microsoft's consistent statements and actions that show the company was using monopoly power to force companies to do what they didn't want to do.

Jay Amato, chairman of the Technology Access Action Coalition, a group of companies that support Microsoft, said in a statement, "It is not -- and should not -- be illegal for a company to be innovative, creative and competitive."