from the Washington Post--
Judge Rules Microsoft Is a Monopoly
By Ted Bridis
Associated Press Writer
Friday, Nov. 5, 1999; 7:19 p.m. EST
WASHINGTON ?? A federal judge ruled Friday that Microsoft is a monopoly whose
influence hurts consumers, a decision that could lead to serious sanctions against the software
empire built by Bill Gates and reshaping of the multibillion-dollar high-technology industry.
The decision by U.S. District Judge Thomas Penfield Jackson to apply the monopoly label is a
significant setback for Microsoft Corp., as well as a clear recognition of the expansive
influence of the software giant whose Windows products run most of the world's personal
computers.
"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," the judge wrote.
The judge said "Microsoft enjoys so much power in the market" that it could charge higher
prices for Windows and "some innovations that would truly benefit consumers never occur for
the sole reason that they do not coincide with Microsoft's self interest."
Still, Friday's action does not necessarily mean the company will lose the case. Federal law
generally bans companies from maintaining monopoly power through illegal business
practices, but not from achieving their success selling popular products or making shrewd
business decisions.
Gates said that the ruling was "part of a long process and that the company as a whole is very
focused on continuing to build great software products."
"We hope we can find a way to resolve this and put it behind us," he said in a videotaped
statement. "We think that there's certainly got to be a way to resolve this that's fair to
Microsoft, fair to the government and most of all fair to consumers who benefit from ongoing
innovation."
Shares of Microsoft on the Nasdaq Stock Market closed Friday at $91.56?, down 18? cents.
In after-hours trading, after the ruling was announced, shares quickly dropped to $88.75.
Assistant Attorney General Joel I. Klein said, "This is a tremendous victory for America's
consumers. ... (that) shows once again that in America no person and no company is above the
law."
A final ruling could come by the end of the year, with any penalties or remedies spelled out
next year.
Jackson could order that Microsoft be broken up into smaller companies that would compete
against each other. Or he could choose from a range of lesser punishments, such as requiring
Microsoft to allow rivals to sell and improve its dominant Windows operating system, or
prohibiting the company from interfering with new technology that could threaten Windows.
Appeals are likely to keep the case in court ? and delay any punishments ? for several years.
The government, which spent $7 million on the lawsuit and used tens of thousands of pages of
e-mail and other documents as evidence, sought to portray Microsoft as the industry bully.
Justice Department lawyers said the company illegally used its heft to undermine competing
technologies and to discourage support for its rivals.
The lawsuit by the Justice Department and 19 states accused Microsoft of bullying the
industry to help maintain its remarkable influence.
Jackson timed the release of his decision to come several hours after most U.S. financial
markets closed for the weekend.
The government previously accused Microsoft of breaking an important related agreement in
1995, and mutual distrust remains. Chairman Bill Gates privately said a few months after that
earlier deal that, "We haven't changed our business practices at all," according to trial evidence.
The success of Microsoft, with $19.7 billion in sales this year alone, rarely wavered during the
legal assault. Its stock price more than doubled since the lawsuit was filed and its Windows
software runs more than 90 percent of computers. Its Web browser ? once considered
second-rate ? is now favored by nearly three-fourths of the roughly 200 million people on the
Internet.
When Forbes magazine last month listed the 400 richest Americans, three of the top four
executives owed their fortunes to Microsoft, including Gates, who turned 44 last week and
personally is worth $85 billion.
Famous for being personally involved in decisions at Microsoft, Gates avoided appearing as a
trial witness. Stephen Houck of the New York attorney general's office, one of two government
lawyers who questioned him in a deposition, told the judge Gates was suffering "a lack of
intestinal fortitude."
The government resorted to playing nearly eight hours of video excerpts from that deposition,
and the judge laughed and shook his head while watching portions. Gates sounded evasive ? at
one point he asked a government lawyer to define the word "definition" ? and professed not to
remember key events and e-mails.
In court, Microsoft at times suffered the equivalent of a hard-drive crash. With help from two
hired experts barely out of college, government lawyer David Boies forced James Allchin, a
senior vice president and a top computer scientist, to admit that a video demonstration shown in
court was false.
The government suffered its share of problems, too. Its top economics expert, Franklin Fisher,
told a surprised Boies that Microsoft hasn't hurt consumers "up to this point."
© Copyright 1999 The Associated Press