|
|
 |
 |
 |
 |
   |
MICROSOFT: JUSTICE STILL HAS A CASEAOL-Netscape doesn't kill its argumentMicrosoft (MSFT)wasted no time pouncing on the news. Just hours after the morning papers reported that America Online (AOL)was negotiating to buy Netscape(NSCP), Microsoft General Counsel William Neukom gathered reporters on the front steps of the E. Barrett Prettyman federal courthouse in Washington, D.C. The merger, he declared, proves that the antitrust case against his company was unnecessary. ''The proposed deal demonstrates a simple truth: There is vigorous competition in the marketplace, and Microsoft faces resourceful and capable competitors,'' said Neukom, who suggested that the government should simply drop its case. ''From a legal standpoint, this proposed deal pulls the rug out from under the government.'' Nice try. Sure, a merger between America Online and Netscape--plus an alliance between them and Sun Microsystems--does, as Neukom points out, give Microsoft a potent new competitor. But it is far from the legal landmine for the trustbusters that Neukom suggests. ''This certainly doesn't help Justice's case, but it doesn't kill it either,'' says New York antitrust attorney Stephen M. Axxin. LIGHTER REMEDIES? News of the deal helps Microsoft Corp.'s legal team in two ways. First, it casts doubt on one of the trustbusters' key claims: that the software giant's aggressive tactics can succeed in killing off competitive threats, such as those posed by Netscape Communications Corp.'s Internet browser and Sun Microsystems Inc.'s Java programming language. By improving the prospects for both of those products, the deal could allow Judge Thomas Penfield Jackson ''to draw the inference that the market effect'' of the company's allegedly predatory actions has been less damaging than the government claims, says George Mason University School of Law antitrust professor Ernest Gellhorn. That, in turn, will make it harder for Justice to prove that Microsoft broke the law. Second, in the event of a government victory in the antitrust suit, Jackson may find that serious restrictions on Microsoft's future business practices are not necessary. By illustrating that Microsoft's competitors are able to band together, the deal diminishes the urgency of judicial intervention in the marketplace and ''suggests that there is a self-correcting process at work that may outstrip the court's ability to implement a cure,'' says William Kovacic, a visiting professor of antitrust law at George Washington University School of Law. Adds Neukom: ''This is exactly the type of area where judges should tread lightly.'' Nonetheless, Microsoft is hardly in the clear. In his testimony on Nov. 23, economist Frederick R. Warren-Boulton, the government's expert witness, argued that Netscape's decision to sell out to America Online Inc. actually demonstrates how badly Microsoft's tactics weakened the onetime Internet-browser leader. He told the court that Netscape, once the most promising startup in the U.S., now had little choice but to merge. ''It's an unfortunate outcome of what Microsoft has been doing,'' said Warren-Boulton. ''STRONG INDICATION.'' Justice's lead prosecutor, David Boies, also sees fresh proof of Microsoft's market power in the new deal. AOL CEO Steve Case has said he still wants to renew his arrangement with Microsoft that gives AOL a preferred position on Windows' opening screen--even if that means continuing to make Microsoft's Internet Explorer AOL's preferred browser, rather than Navigator(NAVG), the competing product made by its putative subsidiary, Netscape. That, says Boies, is ''a strong indication'' of Microsoft's continuing leverage. While the deal may undermine the arguments for extreme remedies--such as a Microsoft breakup--it does little to discredit the basic need for the types of steps that Judge Jackson is most likely to seek. For example, many of Microsoft's competitors would like restrictions on the company's ability to strike exclusive contracts with business partners. Microsoft is able to force partners to agree to these deals, rivals say, because of the monopoly of its desktop operating systems--a fact of life that's unlikely to be changed by the AOL-Netscape combination. So how will things ultimately turn out? Kovacic predicts that if the government prevails, Jackson will ultimately put limits on Microsoft's exclusive deals but that they may be ''less intrusive ones'' than he would have established without the AOL-Netscape deal. That's good news for Bill Neukom & Co.--and no doubt a welcome relief after weeks of seeing government witnesses and awkward videotaped testimony by Chairman William H. Gates III. But Microsoft is by no means out of the woods.
By Mike France, with Paula Dwyer, in Washington, D.C. RELATED ITEMS
|
Updated Nov. 25, 1998 by bwwebmaster
Copyright 1998, by The McGraw-Hill Companies Inc. All rights reserved.
Terms of Use