States will go after Microsoft even if Bush doesn’t

David Lawsky

WASHINGTON: State attorneys general say they are determined to pursue the

antitrust case against Microsoft Corp., even if the Justice Department, under

incoming President George W. Bush, tries to back away.

Microsoft is appealing a trial court ruling that it abused its monopoly power

and should be split in two to prevent further antitrust violations. The US Court

of Appeals will hear oral arguments in February after top posts in the Justice

Department are filled by Republican appointees.

A top economic adviser to Bush has criticized antitrust enforcement under

President Bill Clinton, but opposition to dropping the case from the states and

some in Congress would make it difficult to reverse course.

"We hope and assume that the Bush administration would fully pursue the

Microsoft case through all stages, including the Supreme Court, if that's

necessary," said Iowa Attorney General Tom Miller, leader of the 19 states

that are co-plaintiffs in the case with the federal government. "However,

if for some reason they don't, we have made a commitment to pursue this case to

the end."

The Clinton administration's last hurrah will come on Friday, when it files a

150-page brief with the appeals court ahead of oral arguments on February 27 and

28.

Until now, lawyer David Boies has argued the case for the Justice Department.

He is unlikely to continue in that role. Boies argued for Vice President Al Gore

before the US Supreme Court and lost a 5-4 decision that propelled Bush to the

presidency.

Even before that, the Bush camp had few kind things to say about the Justice

Department’s antitrust policy.

"Radical" approach decried



Bush's recently appointed assistant for economic affairs, Lawrence Lindsey, said
six months ago that the Clinton antitrust policy was "radical" and

needed change.

Lindsey said at the Republican Convention in August that a Bush

administration would have "greater sensitivity" to "respecting

the private sector and respecting the need for innovation and profitability

long-term," specifically mentioning Microsoft.

The states have a new obligation in light of such remarks, said one of the

leading state attorneys general in the case.

"I think the lead order has now shifted hands and the states have

it," Connecticut Attorney General Richard Blumenthal said.

If the administration tries a new tack, it may also face resistance on

Capitol Hill.

Orrin Hatch, the Utah Republican who chairs the Senate Judiciary Committee,

gave strong backing to the former assistant attorney general for antitrust, Joel

Klein, when he decided to take the Microsoft case to trial.

The Judiciary Committee must approve Klein's permanent successor, and the

administration is expected to consult with Hatch before proposing a name for him

to review.

The administration could try to short-circuit matters by settling the case

before the appeals court rules, but Bill Baer, an antitrust lawyer with

Washington-based law firm Arnold & Porter, said that it was "unlikely

that a Bush administration would pull down the appeals process."

Microsoft may find itself in a better negotiating position once the court

rules. In 1998, the Court of Appeals ruled for Microsoft in a related Justice

Department matter.

Continued...

Abandoning the breakup



The appeals court may not entirely throw out the lower court ruling but could
dump the order to break Microsoft up.

"Given the Court of Appeals' history, it is likely to be skeptical about

accepting a breakup as the proper remedy," said Steve Sunshine of

"global law firm" Shearman & Sterling.

If the court agrees that Microsoft violated the law, he said, "the

question becomes what to do about it." That would most likely be the time

for settlement talks, but the states are concerned about the terms.

Iowa's Miller said there would have to be substantial change in the way

Microsoft used its monopoly in the marketplace for the states to agree to a

settlement.

"If there is something less than that, we are committed to pursue the

litigation," Miller said.

Some analysts have speculated that Microsoft might try to reach an agreement

that would remove any remaining legal liability. But an expert says that will

not happen.

"The parties have no power to vacate a court decision," said Andy

Gavil, a professor of law at Howard University. He said the government could ask

the court to reverse the finding of liability as a condition of a settlement,

"but it's pretty unimaginable."

Thomas Penfield Jackson, the trial judge, found in June that Microsoft

illegally used monopoly power in the market for personal computer operating

systems to exclude competitors, in effect placing an "oppressive thumb on

the scale of competitive fortune."

Jackson, who has granted media interviews on the case on several occasions,

was quoted as saying in the Jan. 15 issue of The New Yorker, released on Sunday,

that company Chairman Bill Gates "has a Napoleonic concept of himself and

his company, an arrogance that derives from power and unalloyed success, with no

leavening hard experience, no reverses."

The magazine quoted Jackson as saying about Microsoft executives, "They

don't act like grown-ups!"

Microsoft, in appealing Jackson's ruling, has pointed out that it considers

his remarks to reporters inappropriate.

(C) Reuters Limited 2001.