WASHINGTON-To bolster its case for splitting Microsoft Corp. into two companies-a remedy U.S. District Judge Thomas Penfield Jackson may agree to as early as this week-Justice Department lawyers in the waning days of the antitrust case produced an e-mail and an internal memo from Microsoft Corp. Chairman Bill Gates that they said vividly illustrated how the software giant sought to leverage its monopoly power to position itself in the wireless Internet and PDA markets.
“As the court is aware from the briefs, the ability of the combined company to manipulate the boundaries between applications and operating systems is something that’s going on right now,” said Justice lawyer David Boies, according to a transcript of a May 24 hearing.
Microsoft initially attracted the attention of the Justice Department for, among other things, bundling its Internet Explorer browsing software with its popular Windows operating system in desktop personal computers.
Jackson ruled in April that Microsoft used its monopoly power to violate antitrust law.
To illustrate his point, Boies pointed to an e-mail and a memo from Gates that were unsealed by Jackson the morning of the May 24 hearing. The e-mail, dated July 11, 1999, refers to personal digital assistants and the world’s largest mobile-phone maker.
“We really need to demonstrate to people like Nokia why our PDA will connect to [Microsoft] Office in a better way than other PDAs, even if that means how we do flexible schema in Outlook and how we tie some of our audio and video advanced work to only run on our PDAs,” Gates stated.
A June 28, 1998, memo from Gates deals with a smart-phone strategy and Symbian, a partnership of L.M. Ericsson, Nokia Corp., Psion Computers plc and Motorola Inc. that dominates the platform market for future feature phones.
Realizing Symbian would conduct business with Microsoft competitors, like Sun Microsystems Inc., Gates stated: “If either of these things are the case, then these guys are really at war with us and we should do the most extreme things that we can. This may mean not working with them in some of the other areas like set-top, Phoenix, etc.”
Boies noted that the July 11, 1999, e-mail from Gates was sent shortly after the trial was completed, a point intended to suggest Microsoft was blatantly using the same anticompetitive tactics that prompted the Justice Department and 19 states to file the antitrust lawsuit.
Despite the fact that Microsoft today is not dominant in the mobile-phone Internet and PDA markets, Boies wanted to illustrate intent on the part of Microsoft and how that intent can be translated into anticompetitive behavior.
“These documents are important not because of the specific instances that are here, but because of what it reveals about Microsoft’s strategy-continued strategy to use its power, to use its control over both applications and operating systems to manipulate the boundaries and to induce, threaten, and force people to do what it wants to preserve the barriers to entry by depriving competitors of the things that they need,” said Boies.
But Microsoft’s lack of market share in the wireless Internet and PDA sectors appear to support its claim that its operating system monopoly does not guarantee it success in other markets. Microsoft is pushing the theory that everyone is vulnerable in the Digital Age, even Microsoft.
Nonetheless, the U.S. government wants Microsoft split into two companies. One would run the Windows operating system business. The other firm would oversee all data and Internet applications.
Microsoft said it will appeal a decision by Jackson to break up the firm.
Microsoft legal adviser Charles Rule, a top Justice Department antitrust official in the Reagan administration, defended the Gates e-mails as simply the Microsoft chairman’s desire to push his product.
“It was simply that there are capabilities of the PDAs using Microsoft software that are greater than Palm PDAs, which do not have same level of power of functionality,” Rule told RCR.
Rule said it was not Gates’ purpose to make wireless Internet and PDA software incompatible with other software. “It was nothing exclusionary … There’s nothing anticompetitive” about the e-mail and memo, noted Rule.
As the government’s attempt to compare a Microsoft breakup to the 1984 AT&T Corp. divestiture, Rule replied, “The analogy is extremely superficial.”
Rule said he believes existing antitrust law is adequate for the Digital Age. It’s just that the law was not properly implemented in the Microsoft case, he said.
