Arguing that Microsoft Corp.'s behavior has been "fundamentally anathema to the commitment to competition," the Justice Department and 19 states told a federal judge yesterday that the software giant has violated the Sherman Antitrust Act in at least four ways.
Seeking to apply that 1890 law, which was drafted in an era of railroad and oil monopolies, to a leader of America's "new economy," the government contended in a 70-page legal brief that Microsoft has illegally protected its monopoly in personal computer operating systems by erecting barriers to competitors seeking to enter the market.
The government also asserted that the company illegally tied the purchase of its Windows operating system to the acceptance of other software, entered into exclusionary agreements with PC manufacturers and tried to monopolize the market for Internet "browsing" software.
"Microsoft's multiple actions to repel promising efforts to lower the critical barrier to entry into its monopoly market constitute unlawful maintenance of a monopoly," the government wrote in its brief, citing the firm's effort to thwart the introduction of competitive products by companies such as Intel Corp., Apple Computer Inc. and Netscape Communications Corp.
"This is a classic example of a case 'in which a defendant's possession of substantial market power, combined with his exclusionary or anti-competitive behavior, threatens to defeat or forestall the corrective forces of competition and thereby sustain or extend the defendant's agglomeration of power,' " the government continued, quoting a dissenting opinion written by Supreme Court Justice Antonin Scalia in an antitrust dispute involving Eastman Kodak Co.
U.S. District Judge Thomas Penfield Jackson last month issued a preliminary ruling on factual issues in the case, declaring Microsoft a predatory monopolist that has stifled competition, hindered innovation and harmed consumers, but he stopped short of deciding whether the company's conduct violated antitrust laws. He has said he will tackle that issue early next year, after receiving two legal briefs from each side that address how the facts of the case comport with antitrust law.
Yesterday's filing was the government's first. Microsoft must respond by Jan. 17. Both sides then will have an opportunity to file one more round of briefs.
In an additional court filing yesterday, the 19 states and the District of Columbia argued that Microsoft violated antitrust laws in their jurisdictions.
The filings came as government attorneys spent part of the day meeting with Richard A. Posner, chief judge of the U.S. Court of Appeals for the 7th Circuit, whom Jackson tapped to serve as a mediator for out-of-court settlement talks. Microsoft attorneys are scheduled to meet with Posner today, according to knowledgeable sources.
The two sides could begin negotiating as early as next week, but legal specialists believe the chances for a settlement are slim because the parties remain far apart on key issues.
Microsoft said last night that it disagrees with the government's legal conclusions. "We think that the law doesn't support their arguments and we look forward to presenting our detailed analysis of the law," spokesman Mark Murray said. "We're confident that the judicial system will ultimately find that we competed in a fair and legal manner and our actions were good for consumers and good for innovation."
In its filing, the government did not specify what sanctions it would seek if Jackson rules that Microsoft has broken the law. It simply urged the judge to consider an "appropriate remedy."
"This is a case in which a monopolist in an unregulated market intentionally set out to squash promising marketplace efforts to lower the critical barrier to entry and expansion in the monopolized market," the government wrote. "Whatever Microsoft may think of the value of preserving its [Windows] platform, its calculated effort to prevent competition is fundamentally anathema to the commitment to competition embodied in the Sherman Act."