AOL and industry groups urge for Microsoft breakup

America Online Inc. (AOL) and a trio of high-tech industry groups on Friday filed an amici curiae (friend of the court) brief asking the U.S. Court of Appeals to uphold a U.S. District Court judge’s ruling to split Microsoft Corp. in two. The brief came on the same day as the U.S. Department of Justice (DOJ) filed court papers in which it also defended the judge’s order.

U.S. District Court Judge Thomas Penfield Jackson ruled on June 7 last year that Microsoft should be broken into two parts, after determining that the software giant had abused its monopoly in desktop operating systems to stifle competition. Microsoft appealed the order, which the judge stayed pending the outcome of the appeals process. Both Microsoft and the DOJ are set to engage in oral arguments at the appeals court on Feb. 26 and 27.

Along with AOL, the three IT bodies named in the amici curiae are the Computer & Communications Industry Association, the Software & Information Industry Association, and the Project to Promote Competition & Innovation in the Digital Age, also known as ProComp. ProComp’s backers include Oracle Corp. and Sun Microsystems Inc.

Among the counsel for ProComp is former U.S. Special Prosecutor Kenneth Starr, best known for his role as the government’s special prosecutor in the Monica Lewinsky scandal that once threatened to topple U.S. President Bill Clinton.

The 25-page brief covers familiar ground already trodden by parties supporting the DOJ’s case, such as Microsoft’s violation of U.S. antitrust law as embodied in the Sherman Act and the company’s harmful conduct towards its competitors, notably Netscape Communications Corp., now part of AOL.

The brief also calls for Judge Jackson’s conduct remedies against Microsoft to be upheld, which are also being stayed while the appeal is underway.

The core of the case, according to AOL’s brief, is “Microsoft’s use of a broad range of predatory tactics to maintain its existing monopoly over PC operating systems.”

The filing argues that Microsoft’s guilt has already been proved by the wealth of material drawn from Microsoft executives’ conversations, interviews and e-mails quoted during the antitrust trial in front of Judge Jackson.

“This case is unusual in that Microsoft’s senior executives spelled out their plan to monopolize in detail,” the brief said. “(Microsoft’s documents) spell out not merely an attitude but a clear recognition of the threat to its monopoly and a detailed scheme for suppressing potential rivalry.”

The brief dismisses as “figments of lawyers’ imaginations” Microsoft’s claim that its behavior in the market was designed to achieve economic efficiencies in its business. The software giant’s claim that it linked its Internet Explorer (IE) Web browser to its Windows operating system in order to benefit ISVs (independent software vendors) is a “fictional version of history,” the brief argues. The tying of IE to Windows was a central part of the DOJ’s case against Microsoft.

The brief alleges that Microsoft’s threats to cancel Windows licenses for PC makers who didn’t want to install IE was “a naked threat to put OEMs out of business,” since Microsoft was the sole source for the OS. “The forced inclusion of IE… wasted valuable computer hard drive space, degraded system performance and caused customer confusion,” the brief continued.

By preventing competition in the browser and OS markets, Microsoft also “stifled innovation and limited the competitive potential” of companies such as Apple Computer Inc., Hewlett-Packard Co. and IBM Corp. since they were effectively prevented from installing non-Microsoft browsers on their PCs and weren’t allowed to customize their consumer interfaces, according to the brief. “Similarly, by coercing Intel into abandoning research on software that could have helped other companies compete with Windows, Microsoft hampered innovation and reduced the threat of competition to its operating system monopoly,” the brief added.

It’s vital to curtail Microsoft’s behavior by splitting the company up, the brief contends, since the software vendor “is already expanding the Windows monopoly to engulf additional technologies that might present alternative platforms.” The brief points to Microsoft’s behavior when asked to comply with court decrees in the past. “(T)he record here demonstrates that Microsoft does not take legal obligations seriously and cannot be trusted to comply with them,” the brief said. “When the district court tried to enforce the 1995 consent decree, Microsoft responded by proposing to distribute a version of Windows that did not work — and with a straight face told the court that its order required such a response.”

The brief continues, “After more than a decade of antitrust enforcement scrutiny, Microsoft continues to use illegal means to short-circuit competitive challenges to its dominance. The district court properly concluded that it is time for those abuses to end.”

Microsoft is “already tying Windows Media Player to Windows” and is pursuing a similar course with other software products including instant messaging, the brief contends. Splitting Microsoft into two companies, one owning the company’s operating system, the other its applications including IE, would encourage both units to support non-Microsoft products, hopefully boosting the adoption rate of other operating systems, notably Apple’s Mac OS and Linux, the brief argued.

The brief points to the break-up of AT&T Corp., which unleashed “nearly two decades of innovation” and benefitted shareholders and customers alike, as a possible template for Microsoft. AT&T had also claimed that it could not be split up without “ruinous results,” the brief notes.

“Established principles of competition allow us to predict that the break-up of Microsoft will similarly inject competitive rigor into the industry, likely leading to increased innovation and consumer welfare,” the brief states.

“Microsoft simply did not care about the requirements of federal antitrust law,” the brief concludes. “To reward Microsoft by freeing it from antitrust liability and a meaningful structural remedy would contravene clear Supreme Court precedent and send an extraordinarily harmful message to the business community.”

The software giant has butted heads with AOL before, notably voicing criticism over AOL’s multi-billion U.S. dollar merger with Time Warner Inc., claiming it would harm competition. The merger was completed following the official go-ahead from the U.S. Federal Communications Commission (FCC) late Thursday.

Earlier Friday, the DOJ filed its own brief with the Appeals Court in which it defended both Judge Jackson’s ruling, as well as the judge himself [See story – U.S. government brief defends Microsoft decision]. The software vendor is due to submit its response to the DOJ’s filing on Jan. 29.

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Jim Love, Chief Content Officer, IT World Canada

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