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Microsoft renews attack
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May 22, 2000: 7:13 p.m. ET
Software giant adds to defense with new filing in government antitrust case
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NEW YORK (CNNfn) - In an unexpected court filing Monday, Microsoft Corp. tried to use the government's own words against it as justification for not breaking up the company.
In a filing with the U.S. District Court for the District of Columbia, Microsoft (MSFT: Research, Estimates) repeated an earlier request that Judge Thomas Penfield Jackson, who is overseeing the antitrust proceeding, immediately dismiss the government's proposal to divide the company in two. In its argument against a breakup, Microsoft referred to an earlier case against the company that ended in a settlement and a consent decree, which the Justice Department alleges Microsoft later violated.
In its filing, Microsoft said that government attorneys admitted in the earlier case that a breakup of the company would be dangerous to the economy's welfare and against the public interest.
However, antitrust experts said that Microsoft was found to have engaged in a wide variety of anti-competitive conduct since 1995, making the company's legal position very different now than it was five years ago.
"Microsoft did a whole bunch more things wrong after the consent decree," said Robert Litan, vice president and director of economic studies at the Brookings Institution. Litan, who was a deputy assistant attorney general between 1993 and 1995, helped negotiate the 1995 consent decree in the earlier case against Microsoft. "A breakup is not as preposterous today as it was back then."
Five years ago, various private-sector witnesses filed a memorandum with U.S. District Judge Stanley Sporkin saying that the court should require Microsoft to divest its applications businesses to create a "Chinese Wall" between the company's applications and operating system employees. In response, attorneys for the government said that "the law would not permit the sweeping remedies" that those witnesses suggested, and that "remedies such as dismembering Microsoft would act against the public interest."
Microsoft's actions after the 1995 consent decree
However, the case that the government filed against Microsoft in 1998 alleges that the company engaged in a wide range of anti-competitive conduct that wasn't at issue in 1995, including: seeking to divide the Web browser market with Netscape Communications and later attempting to snuff out Netscape; interfering with Intel's multimedia technology decisions; forcing Apple to accept Microsoft's Web browser under threat of losing Microsoft's Office suite of applications for the Macintosh; and imposing exclusionary deals on dozens of Internet service and content providers.
A government official told CNNfn that Microsoft's filing made Monday "relies on statements made by the government before Microsoft engaged in numerous illegal acts found by the court in the current case. The fact that Microsoft repeatedly violated the law after the proceedings demonstrates why structural relief is necessary to prevent antitrust violations in the future."
 Separately, Microsoft's filing states that "the government fails to identify a single case in which the court ordered the breakup of a unitary company such as Microsoft outside of the context of negotiated consent decrees."
"In short, when it comes to the controlling case law, the government essentially punts -- there is no precedent for ordering the dismemberment of a unitary operating company."
Microsoft's filing also said that Judge Jackson didn't conclude that Netscape's Navigator and Sun Microsystems' Java technology would have created competition in the market for PC operating systems, even if Microsoft hadn't engaged in anti-competitive behavior.
"Without such a finding, the government's request for structural relief must fail," Microsoft's filing said. "The government's position on the importance of causation may have changed over the years, but the law has not."
Wednesday's showdown in Washington
Attorneys for Microsoft and the government are scheduled to square off against each other in a hearing before Judge Jackson on Wednesday. At that hearing, Judge Jackson may indicate whether he favors or opposes splitting Microsoft into two companies, one of which would consist of its operating systems business and the other would be its applications businesses.
In a filing made with the District Court on May 10, Microsoft strongly opposed the government's proposal to split the company and said that it should be given until Dec. 4 to prepare arguments against a breakup if Judge Jackson is willing to consider the government's proposal.
"Microsoft makes a pretty powerful case that they need more time," said Robert Lande, a professor at the Baltimore School of Law who specializes in antitrust law. "The idea of a breakup wasn't raised officially until April 28, so this hearing comes less than a month later."
Antitrust experts said that Judge Jackson needs to hold additional hearings about whether a breakup is the right action to take against Microsoft to reduce the chance that his final decision will be reversed on appeal. Judge Jackson may schedule those additional hearings at Wednesday's event, antitrust experts said.
"It's against the Justice Department's interest to have Judge Jackson make an immediate remedy decision because that increases the odds that he would be reversed on appeal," said Brookings' Litan. "There is a fair chance that experts who have already submitted affidavits in the case will be called as witnesses and there will be a mini-trial that revolves around remedies."
"I think the judge will discuss the future schedule in the courtroom because the process is closely connected to the substance of the government's proposal," said Bill Kovacic, a professor at George Washington University's law school, who has followed the case closely. "Under the guise of process, you could see a debate about substance of government's proposals."
Securities analysts and some antitrust experts say the odds that Microsoft will eventually be split in two are remote. Even if Judge Jackson were to order such a split, he is very likely to be reversed on appeal, they say.
"I'm a pretty harsh Microsoft critic, but even I don't see a significant chance of a breakup," said the Baltimore School of Law's Lande. "When it's all said and done, Jackson is a Reagan appointee and a conservative man. Conservative people don't break up companies, which is considered the corporate death penalty." 
-- CNNfn's Steve Young contributed to this report
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