Microsoft's Last Stand
Mar 08 1999
WASHINGTON - For the next six weeks, the government's antitrust case against Microsoft stands in recess while the judge and the attorneys conduct other business and prepare for the drama's final act. During the break, the stage will be set for what could be the most dramatic moments in a trial that already has been replete with smoking-gun e-mails, recanted testimony, allegations about doctored technical demonstrations and unflattering clips from videotaped depositions.
Most of those revelations have been in the government's favor; perhaps the rebuttal testimony will only serve to determine how bad Microsoft loses. But desperate companies sometimes do desperate things.
Under the rules established by U.S. District Court Judge Thomas Penfield Jackson, each side had 12 witnesses who were named and deposed weeks before the trial started. But the rebuttal witnesses could hold some surprises.
Each side may call two rebuttal witnesses, although that doesn't include some witnesses returning for encore performances, namely each side's lead economist. The identities of the last witnesses likely won't be made public until the parties conduct a scheduling conference in court March 31. In the meantime, there's already speculation about the potential cast of characters each side may draw upon in determining how to salvage or slam-dunk their case.
To explore the possibilities, The Standard consulted with a panel of experts to assemble a list of potential rebuttal witnesses for each side, predict what they might say on the stand and describe the pros and cons of calling each.
POTENTIAL WITNESSES FOR THE PROSECUTION
Option 1: Call No One.
Theory: The government has already won.
Pro: The government seems to have convinced the judge that it has a good case. Lead attorney David Boies has done a stellar job turning some of Microsoft's own employees into government witnesses and raising questions about the validity of every Microsoft technical demonstration offered into evidence. "I'm not sure I'd call a rebuttal witness. They've accomplished just about everything they set out to accomplish," says John Lopatka, law professor at the University of South Carolina and a former antitrust official with the Federal Trade Commission.
Con: Aside from Boies' courtroom theatrics, some say the government case is actually short on legal merit. Boies' own economist testified there was not yet any harm to consumers. And it's hard to argue that Netscape has had trouble distributing its browser when it boasts that 100 million copies have been downloaded over the Internet.
Option 2: Call Steve Case.
Theory: The AOL chief could reiterate that what tipped the scales in the company's decision to use Microsoft's Internet Explorer browser rather than Netscape Navigator was winning a position on the Windows desktop in the online services folder.
Pro: The judge seemed impressed by an interview Case gave to the Washington Post in which Case described his continuing fear of Microsoft and said that the new Netscape-AOL-Sun partnership won't compete in the operating-systems market. In fact, the judge was so impressed that he entered the interview into evidence. Soon after, government attorney Joel Klein was spied talking to Case at a preview of You've Got Mail.
Con: "I think it is risky for them to bring in someone like Case or McNealy, or any members of the Netscape- AOL-Sun alliance," says trial observer William Kovacic, law professor at George Washington University. "They should stay away from that subject. It puts them in an awkward position of saying, 'Our deal is trivial but, at the same time, it's important.'"
Option 3: Call Ted Waitt.
Theory: Gateway's CEO could talk about the pressure computer manufacturers face from Microsoft, in particular the pricing pressure for Windows.
Pro: According to a memo filed under seal but obtained by the Associated Press and the Washington Post when the Justice Department mistakenly dropped it off in the trial press room, Gateway officials complained that Microsoft rewarded allies, such as Compaq Computer and Dell Computer , with lower prices for Windows. Gateway, of course, has had disputes with Microsoft over browsers and other technologies.
Con: Like most personal computer manufacturers, Gateway probably doesn't want to get involved publicly because of the danger of souring relations with Microsoft.
Option 4: Call Scott McNealy, Marc Andreessen, Larry Ellison or someone else from the anti-Redmond cabal.
Theory: The government could use another Sun witness, in particular, to better make the case about Microsoft's alleged efforts to end- run crossplatform technologies, in particular the Java programming language.
Pro: "Unless the government really beefs up the Java case, I don't see a 'death penalty' remedy against Microsoft," says Rich Gray, an antitrust attorney with Bergeson, Eliopolous, Grady & Gray of San Jose, Calif. The death-penalty scenario would be to break up the company. If it's thinking aggressively, the government may want to take this option if the judge presiding over the Java case between Microsoft and Sun issues a final judgment prior to the start of the rebuttal period.
Con: Any of those guys likely has some pretty damning e-mails they'd have to turn them over to Microsoft on discovery.
POTENTIAL WITNESSES FOR THE DEFENSE
Option 1: Call Bill Gates.
Theory: The only way to battle the bad impression that the videotape left with the judge is to come into court and sound straightforward and truthful.
Pro: There's not much to lose. A frank admission that "we have market dominance, if not a monopoly, because we won it fair and square, and are competing honestly in the rapidly changing technology market" could give Microsoft an upset. His performance could only improve, right?
Con: Microsoft's legal team may be worried that the $80 billion man could end up the subject of a perjury investigation, much like that other Bill who filmed a videotape last year. "Monopolists have a strange view of the world. They have a tendency to think they got there by the divine right of kings," says George Cumming Jr., an ex-DoJ lawyer now with San Francisco's Brobeck, Phleger & Harrison. "I'd be afraid he'd be very arrogant."
Option 2: Call Michael Dell.
Theory: The Dell Computer founder could speak of good relationships with the software behemoth, much as Compaq tried to do.
Pro: "If Dell Computer came in and said, 'They never did anything to us and we were competing with them in some way," says Lopatka, "that assaults the gestalt of the case that Microsoft was out there bludgeoning everyone."
Con: He might be hammered by the argument in the Gateway memo.
Option 3: Call a Mystery Economist.
Theory: The government had two expert economists and Microsoft should, too.
Pro: Microsoft's economics guy, Richard Schmalensee, the dean of the management school at MIT, was hurt by sticking to his extreme position that Microsoft has no monopoly because there is no separate market for an Intel -based PC operating system. They need to find someone to testify that Microsoft's prices have actually fallen. "Their trump card is the lack of consumer harm," says Stephen Margolis, an economist at North Carolina State University, and a Microsoft supporter. "In markets where Microsoft is important, software prices have fallen dramatically and functionality has increased dramatically."
Con: They are unlikely to find an economist who fits all these criteria and doesn't contradict Schmalensee and Microsoft on the monopoly issue.