A PATTERN OF PREDATORY BEHAVIOR?After six witnesses, Justice's case is coming together
The chief executive of Netscape Communications Corp. (NSCP)claims that Microsoft Corp. swore retribution if Netscape didn't cede most of the Internet browser market. An Apple Computer Inc. (AAPL)executive testifies that Microsoft (MSFT)threatened repercussions if Apple didn't drop most of its multimedia software products. An Intel Corp. (INTCW)exec says Microsoft made ''credible and fairly terrifying'' threats to harm Intel's new microprocessor if it didn't shelve its own software efforts. And an IBM executive says Big Blue's operating system couldn't gain ground because Microsoft discouraged software developers from writing applications for it.
See a pattern? After presenting several of its key witnesses, the Justice Dept. certainly hopes so. By piling example on top of example, the government aims to convince Judge Thomas Penfield Jackson that whenever Microsoft senses a rival's technology might threaten its dominance, it tries to bully the upstart out of the market. If that doesn't work, Justice claims, it attacks the competitor--frequently by pressuring distributors, customers, and software developers not to use the rival technology. Separately, each instance of this behavior might not prove predatory behavior. ''But the government wants to show that the cumulative effect was to deter people from competing against Microsoft,'' says Washington antitrust lawyer William J. Kolasky Jr.
If chief prosecutor David Boies can prove that, then Jackson may be more likely--when the case reaches the penalty phase--to slap major restrictions on Microsoft's future business dealings. Says Stephen Calkins, antitrust professor at Wayne State University Law School: ''At the end of the day, the government will say, 'Look at instance after instance in which Microsoft abused its monopoly power. We urge you, judge, to conclude that it can't be trusted to retain its monopoly.'''
''FULL OF GARBAGE.'' In its counterattack, Microsoft argues that Justice can't assert a pattern of illegal behavior if the company was merely pursuing legitimate business objectives, as it claims. ''In every case, it involved a proposal to cooperate on technology,'' says Charles F. Rule, a Microsoft legal consultant; Microsoft was merely ensuring that other companies' products worked seamlessly with Windows. Rule says that the government, lacking a convincing major charge, is trying to compensate by laying out many small ones. In the end, he warns, the government may wind up with ''just a garbage bag full of garbage.''
How good is the government's evidence of a pattern of abusive behavior? Since the opening day, a number of witnesses have outlined the ways Microsoft attempts to influence how companies should develop technology--to Microsoft's advantage. Netscape CEO James L. Barksdale, the government's lead-off witness, told how Microsoft tried to push Netscape out of the Windows market. Later, Intel Vice-President Steven D. McGeady testified that Intel was pressured to drop a software product because Microsoft threatened to withhold Windows support for a new Intel chip.
If the competitors ignore Microsoft's threats, the software giant next launches a battery of predatory attacks--including everything from giving away their version of rivals' products for free to encouraging distributors to shun them. When Apple refused to stop pursuing the market for multimedia software, Microsoft persuaded Compaq Computer Corp. (CPQ)to drop its plans to include a new version of Apple's QuickTime multimedia package in its computers, according to Apple Senior Vice-President Avadis Tevanian Jr.
Justice has also managed to bolster its challenge to the legality of Microsoft's bundling of its Internet browser with Windows--a key facet of the original DOJ complaint that has been weakened by an appeals court ruling. In court, Boies's team has shown that the bundling technique that Microsoft supposedly used to thwart Netscape is a tactic that the software maker has used repeatedly. For instance, Justice has testimony indicating that Microsoft bundled a competing program to Apple's QuickTime. And an executive from America Online Inc. (AOL)testified that Microsoft's decision to bundle its own online service, Microsoft Network (MSN), into the operating system was a club it used against AOL to get it to promote the Microsoft browser.
Microsoft's playbook calls for tearing down each charge one by one. But as Justice piles on one damning tale after another, it hopes to produce a whole picture of monopolization that is far bigger than the sum of its parts.
By Susan B. Garland in Washington and Mike France in New York
Updated Nov. 19, 1998 by bwwebmaster
Copyright 1998, Bloomberg L.P.