Bill Gates is optimistic of emerging a winner

"Every contract, combination, in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce is declared illegal. Every person who shall monopolize, or attempt to monopolize, or combine to conspire to monopolize any part of the trade or commerce, shall be deemed guilty of a felony."

So states the 1890 American "Sherman AntiTrust Act." 109 years after the law went into effect, software giant Microsoft was ruled a monopoly by those standards by Federal District Court Judge Thomas Penfield Jackson. Not only did Jackson rule Microsoft a monopoly, he did so in no uncertain terms in a 207-page "Findings of Fact" report that is loaded with often harshly-worded criticism. Jackson shot down every one of Microsoft’s defenses and excuses for its behavior and actions. While significant, the consequences of the ruling won’t be known for years as the case faces many additional phases. If Microsoft refuses to work out a settlement with the U.S. Justice Department and opts to appeal the verdict and punishment that could result from the Monopoly ruling, the case is likely to remain tied up in court for as long at 10 years.

In his ruling, Jackson provided legal analysts with ample hints that his next ruling, expected in the first quarter of 2000, will find Microsoft guilty of actually having broken Federal antitrust laws. Microsoft chief Bill Gates immediately announced that he disagreed with Judge Jackson’s conclusion, but said he is willing to negotiate a settlement based on the premise that Microsoft will be allowed to continue to innovate and improve its products in ways it considers legal and fair. "We respectfully disagree with a number of the court's findings. We'll continue to make our best efforts to resolve the case. From the very beginning, we've said we would like nothing better than to settle this case. Getting it behind us would be a very good thing, but we'll continue to stick up for our principles."

Gates also said he believes Microsoft would prevail in court in the end. "The American legal system ultimately will affirm that Microsoft's actions in innovations were fair and legal and have brought tremendous benefits to millions of consumers," he said. However, Bill Neukom, Microsoft's senior vice president for law and who managed the company’s legal defense, conceded that the government had clearly proven its legal point. "The findings of fact are more consistent with the government's claims than they are with Microsoft's defenses."

Assistant Attorney General Joel Klein, who headed the case against Microsoft said Jackson’s findings are proving the government correct. "It shows, once again that in America, that no person and no company is above the law. This is a tremendous victory for America's consumers." Klein added that the federal government is prepared to discuss settlements. "We have always said we are prepared to discuss settlement so long as the important competition issues are fully addressed." Klein added that Microsoft's abuse of monopoly power had caused "substantial harm to consumers and innovation and should result in serious remedial redress."

Connecticut Attorney General Richard Blumenthal, one of 19 states that joined the Justice Department in the antitrust lawsuit, was more blunt in his assessment. "Today, we have established a solid beachhead -- an unshakable legal base for moving forward to liberate this industry from Microsoft's illegal dominance. Microsoft has monopoly power, abused that monopoly and harmed consumers in immediate and discernible ways. These are serious and far-reaching violations that should lead to serious and far-reaching remedies," he said.

David Boies, the private lawyer who led the court attack against Microsoft on behalf of the Justice department hugged a smiling Klein and Blumenthal during a press conference in Washington DC. Boies said, "This is not a surprise. This is exactly what the evidence showed." The centerpiece of Jackson’s ruling is his conclusion that, "Most harmful of all is the message that Microsoft's actions have conveyed to every enterprise with the potential to innovate in the computer industry. Through its conduct towards Netscape Communications, IBM, Intel, Compaq and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft’s core products."

Jackson cited three key facts for judging Microsoft a monopoly. "Viewed together, three main facts indicate that Microsoft enjoys monopoly power. First, Microsoft's share of the market for Intel-compatible PC operating systems is extremely large and stable. Second, Microsoft's dominant market share is protected by a high barrier to entry. Third, and largely as a result of that barrier, Microsoft's customers lack a commercially viable alternative to Windows," Jackson ruled. Microsoft’s predatory behavior has harmed the industry and consumers alike, Jackson said. "Microsoft's past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Microsoft. The result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest.''

It is widely expected that the U.S. Justice Department will seek severe punishment against Microsoft and may force the company to break up into three or more parts built around core business interests such as operating systems software, applications, and Internet products and services. Other possibilities include forcing Microsoft to allow rivals to sell their own versions of Windows, requiring Microsoft to incorporate rival products in Windows (such as Netscape’s navigator); or barring Microsoft from selling Windows at lower prices to favored computer makers. Gates’ mildly-worded criticism of Jackson’s ruling indicates Microsoft is considering the option of settling the case. The biggest incentive to do so is that the company faces potentially expensive lawsuits from competitors, alleged victims and even consumers if the verdict is upheld that could drain the company of its financial resources. If Microsoft and the government settle, however, the finding of monopoly power would never become final and the threat of lawsuits virtually disappears.

The U.S. Justice Department too is eager to get a settlement before the end of the Clinton Administration’s term ends in January 2001. A Republican victory in the White House could cause the case against Microsoft to be severely impeded. A Republican President, for example, could refuse to have the Justice Department any decision by an Appeals Court in Microsoft’s favor. Microsoft’s competitors expressed considerable relief, if not elation at the Judge’s ruling:

• "I would think it would make Microsoft feel compelled to find some settlement before a remedy comes from this judge, because he seems determined to stop this kind of behavior.'' Said James Barksdale, former chief executive officer of Netscape Communications.



• "Hallelujah! If we could jump any higher right now, we would,'' said Ransom Love, president and chief executive of Caldera, a Utah-based software maker that's suing Microsoft in a separate case charging predatory practices.



• "The facts of the case lead us to conclude that nothing short of a lasting structural remedy will suffice. We trust in the continued good efforts of the Department of Justice and Judge Jackson to determine a fair way to separate the Windows operating system from Microsoft's other businesses," said Bill Campbell, Intuit's chairman as well as a witness called by the government during the trial.



• "I was really surprised. I didn't expect the force or the condemnation that we have seen,'' said Bob Davis, chairman and chief executive of Lycos, the Web network and search service.