States in Antitrust Case Eye New Ground

The nine dissenting states and the District of Columbia in the Microsoft antitrust suit are pressing their case with the help of witnesses from a broad array of tech-based businesses.

WASHINGTON--The nine dissenting states and the District of Columbia in the Microsoft Corp. antitrust suit are pressing their case with the help of witnesses from a broad array of tech-based businesses, indicating that the suit could go beyond the scope of previous court rulings.

Some observers said the move to include such diverse witnesses as Palm Inc., Nokia Corp. and SBC Communications Inc. could signal that the states are overstepping their legal bounds, since the case against Microsoft involves specific past antitrust violations. But proponents of continued action against Microsoft said its important for plaintiffs to highlight the Redmond, Wash., companys potential impact on emerging technologies not already addressed by the U.S. Court of Appeals.

"This isnt about any problem we have with Microsoft," said William Plummer, vice president of government and industry affairs for Nokia, in Washington. "This is just an opportunity to talk about what the future can be. This really is an opportunity that was presented to us. Its a chance to describe what the world can and should look like—open standards and a seamless architecture to give consumers a wider array of interoperable devices."

To critics of the ongoing Microsoft litigation—those who support the settlement reached in November by the Department of Justice and nine other states—the case should be limited to the points addressed by the appeals court. "The [states] proposed remedies certainly go beyond the scope of the case, and thats something that people should be concerned about," said Jim Prendergast, executive director of Americans for Technology Leadership, a Washington-based lobbying group of which Microsoft is a founding member. "I dont know why Palm is jumping on this thing. I dont know why a Baby Bell is getting involved."

Advocates of the states tough remedy proposals, however, applaud the inclusion of developing technologies because they may eventually compete with traditional desktop computing, where Microsoft has asserted its power. "I think what the states will probably show is that Microsoft is using the same illegal tactics—the tactics they used to crush Netscape [Communications Corp.]—to extend its monopoly into telecommunications," said Norman Hawker, research fellow at the American Antitrust Institute, in Washington.

Part of the appeals courts ruling directed that remedies should prevent Microsoft from reasserting its monopoly. By calling on wireless vendors and telecommunications carriers, the states will likely try to demonstrate that the monopoly potentially could be asserted over applications such as instant messaging and wireless communications, said Hawker, who is also an associate professor at Western Michigan University.

Whether emerging technologies are relevant to the case hinges in part on how the court chooses to regard future market conditions. "You cant go to the courts to determine how Microsoft should behave six months, one year or two years from now," ATLs Prendergast said. "If the attorneys general are trying to go out and create opportunities for new technologies and startups, I think theyre in the wrong business."

Settlement proponents also criticized the states for focusing, at least preliminarily, on Microsofts competitors. "For those people who had any doubt about whether the proposed remedy is an early Christmas present to Microsoft competitors, the witness list just reinforces that it is," Prendergast said. "It reads like a Whos Who of Microsoft competitors. Theyve sort of tipped their hand in showing that the case is about Microsoft competitors, not about consumers."

From the perspective of tough-remedy advocates, however, restoring competition to the marketplace necessarily means examining the position of competitors. "Right now, we have one single institution thats directing what will happen in the future, and thats Microsoft," AAIs Hawker said. "Antitrust law is about protecting and promoting competition, and you cannot have competition without competitors."

In a brief filed in response to the dissenting states proposed remedies in December, Microsoft rejected an amended settlement, saying, "The principal beneficiaries of such provisions are not consumers, but rather the numerous Microsoft competitors found on the non-settling States preliminary witness list."

Microsoft lawyers told the court that the states case appeared "calculated to inflict maximum commercial harm on Microsoft. Their proposed judgment is substantially broader and much more onerous than the prior conduct provisions vacated by the Court of Appeals."

Microsoft refused to disclose its own preliminary list. Industry observers speculated that the company is likely to call executives from closely allied OEMs and software developers, DOJ officials and economists, among others. The witness lists will be finalized Feb. 8.

Additional reporting by Carmen Nobel