With 207 scathing and unequivocal pages, Judge Thomas Penfield Jackson has fired a judicial broadside that will reverberate throughout the Internet economy.
By endorsing the Justice Department's allegations that Microsoft bullied rivals and that the bullying significantly harmed consumers, Jackson has taken a long step toward setting tough rules for dominant firms in the booming technology sector, experts say.
He has also forcefully answered skeptics who contend that the markets for software and computers are too fleet and fluid for the sometimes plodding hand of antitrust law. He rejected notions that there is something special about the new economy.
Indeed, his basic theme was that threats and intimidation on the part of a monopolistic corporation, with the intent to "exile" rivals, are plainly and simply anti-competitive and anti-consumer, notwithstanding claims of "innovative" intent.
"A lot of leading high-tech companies have been real cowboys when it comes to competing," said Steven Newborn, an antitrust lawyer at Rogers & Well in Washington. "In light of this decision, they're going to have to lasso themselves in."
As expected, the findings do not draw explicit conclusions about who won or lost the case, or deal with any possible remedies. That's months away, after each side has another chance to argue in court about how to fix whatever Jackson might believe is broken in the multibillion-dollar software market.
But Jackson's opinion could immediately influence the course of high-tech commerce, specialists say. In particular, he broadly hinted at a willingness to establish strict standards about when it is legal for a company to leverage its power in one market into another, in this case, from software into the World Wide Web. He effectively put large companies on notice that they'll have to restrain themselves when dealing with smaller rivals.
"This is going to cause dominant firms to think twice before throwing their weight around," said Lawrence Ausubel, a professor of economics at the University of Maryland.
Jackson dismantled Microsoft's defenses one by one in uncompromising language, dismissing some of them as "specious." He declared unequivocally that using "threatening" tactics, "pressure," "retaliation" and "discriminatory" treatment, the company set out to "exile" its competitor.
Time and again, he underscored that Microsoft's tactics had harmed consumers by reducing their choices and, in one instance, creating "confusion and frustration" that "increased technical support costs." Far from expanding the horizons of technology, Jackson said, Microsoft's actions were aimed at "quashing innovation." Such findings--damage to consumers and harm to fundamental notions of competition--go to the heart of liability in antitrust law.
This unflinching appraisal angered some executives who argued yesterday that Jackson's findings go too far in hamstringing high-tech's best-known players.
"Any would-be entrepreneur is getting a message from Washington that says, 'Become successful, but not too successful or we'll ruin your life,' " said venture capitalist Tim Draper. "I get the feeling this attack was just because they're big."
The influence of Jackson's findings is expected to be far-reaching in large measure because the case law that governs the fastest-growing segment of the economy is only now being written. The broad outlines of antitrust law, which referee the ongoing melee of American capitalism, may be pertinent as ever, but antitrust law was drafted decides ago with different monopolies in mind.
The tricky question is how to apply these rules to software and computer markets, which expand and shift quickly in ways that are nearly impossible to predict. Jackson's stern language opens the door for dramatic remedies, which could include breaking up the company or forcing it to license its software code.
The findings are the handiwork of a judge striving to bulletproof his conclusions against possible attack by an appeals court.
His review of the case is comprehensive enough to signal to an appeals court that he has painstakingly sifted the evidence. It focuses heavily on the credibility of witnesses, in part because appellate judges tend not to second-guess conclusions about who is telling the truth.
"It's an awesome opinion," said Ken Kudon, a Washington antitrust lawyer. "It appears to me that even an appeals court which has shown a strong preference for the laissez-faire approach to competition will have a hard time undermining this document."
Jackson has handed antitrust enforcers strong encouragement simply by releasing his findings a mere 12 months after the start of the trial. Though the judge's pace might seem geologic to casual observers, he is actually proceeding at a relatively swift clip. If Microsoft and the government don't settle, the inevitable appeals could be resolved in higher courts in two years, which is a fraction of the time consumed by, for instance, the IBM monopoly case. The Reagan administration dropped that matter after 700 trial days spread over 12 years.
The Vietnam-like wars of attrition against International Business Machines Corp. and AT&T Corp. taught a generation of antitrust enforcers that monopoly cases are simply too cumbersome and resource-sapping to work. Jackson's fast-track approach could upend that theory. Experts already expect that both the FTC and Justice will now be emboldened by Jackson's handling of the case, which could mean more monopoly cases in the future.
Key points in U.S. District Judge Thomas Penfield Jackson's findings of fact in the Microsoft antitrust case:
Microsoft wields monopoly power in the personal computer industry.
Microsoft hurt consumers by stifling innovation, charging higher prices and selling a complex product that made computers more susceptible to crashing.
Microsoft set out to crush the competing Netscape Web browser by bundling its own Web browser with its Windows operating system.
Microsoft pressured other companies including Intel, Apple, RealNetworks and IBM to halt development of products that threatened its "most cherished software."