FC: Judge Jackson slams Microsoft: Break 'em up!

[Declan McCullagh <declan () well com>]

                        UNITED STATES DISTRICT COURT
                        FOR THE DISTRICT OF COLUMBIA
     _________________________________________________________________

   )
                                     )
                        UNITED STATES OF AMERICA, )
                                     )
                                Plaintiff, )
                                     )
                    v. ) Civil Action No. 98-1232 (TPJ)
                                     )
                          MICROSOFT CORPORATION, )
                                     )
                                Defendant. )
                                     )
     _________________________________________________________________

   )
                                     )
                        STATE OF NEW YORK, et al., )
                                     )
                               Plaintiffs, )
                                     )
                                    v. )
                                     )
                          MICROSOFT CORPORATION, )
                                     )
                                Defendant. )
                                     )
     _________________________________________________________________

   ) Civil Action No. 98-1233 (TPJ)
                                     )
                          MICROSOFT CORPORATION, )
                                     )
                         Counterclaim-Plaintiff, )
                                     )
                                    v. )
                                     )
                         ELIOT SPITZER, attorney )
                         general of the State of )
                        New York, in his official )
                            capacity, et al., )
                                     )
                         Counterclaim-Defendants. )
                                     )
     _________________________________________________________________

                            MEMORANDUM AND ORDER

   These cases are before the Court for disposition of the sole matter
   presently remaining for decision by the trial court, namely, entry of
   appropriate relief for the violations of the Sherman Act, §§ 1 and 2,
   and various state laws committed by the defendant Microsoft
   Corporation as found by Court in accordance with its Findings of Fact
   and Conclusions of Law. Final judgment will be entered
   contemporaneously herewith. No further proceedings will be required.

   The Court has been presented by plaintiffs with a proposed form of
   final judgment that would mandate both conduct modification and
   structural reorganization by the defendant when fully implemented.
   Microsoft has responded with a motion for summary rejection of
   structural reorganization and a request for months of additional time
   to oppose the relief sought in all other respects. Microsoft claims,
   in effect, to have been surprised by the "draconian" and
   "unprecedented" remedy the plaintiffs recommend. What it proposes is
   yet another round of discovery, to be followed by a second trial - in
   essence an ex post and de facto bifurcation of the case already
   considered and rejected by the Court.

   Microsoft's profession of surprise is not credible.(1)
   From the inception of this case Microsoft knew, from well-established
   Supreme Court precedents dating from the beginning of the last
   century, that a mandated divestiture was a possibility, if not a
   probability, in the event of an adverse result at trial. At the
   conclusion of the trial the Court's Findings of Fact gave clear
   warning to Microsoft that the result would likely be adverse, yet the
   Court delayed entry of its Conclusions of Law for five months, and
   enlisted the services of a distinguished mediator, to assist Microsoft
   and the plaintiffs in reaching agreement on a remedy of some
   description that Microsoft knew was inevitable. Even assuming that
   Microsoft negotiated in utmost good faith in the course of mediation,
   it had to have in contemplation the prospect that, were mediation to
   fail, the prevailing plaintiffs would propose to the Court a remedy
   most to their liking and least likely to be acceptable to Microsoft.
   Its failure to anticipate and to prepare to meet such an eventuality
   gives no reason to afford it an opportunity to do so now.

   These cases have been before the Court, and have occupied much of its
   attention, for the past two years, not counting the antecedent
   proceedings. Following a full trial Microsoft has been found guilty of
   antitrust violations, notwithstanding its protests to this day that it
   has committed none. The Court is convinced for several reasons that a
   final - and appealable - judgment should be entered quickly. It has
   also reluctantly come to the conclusion, for the same reasons, that a
   structural remedy has become imperative: Microsoft as it is presently
   organized and led is unwilling to accept the notion that it broke the
   law or accede to an order amending its conduct.

   First, despite the Court's Findings of Fact and Conclusions of Law,
   Microsoft does not yet concede that any of its business practices
   violated the Sherman Act. Microsoft officials have recently been
   quoted publicly to the effect that the company has "done nothing
   wrong" and that it will be vindicated on appeal. The Court is well
   aware that there is a substantial body of public opinion, some of it
   rational, that holds to a similar view. It is time to put that
   assertion to the test. If true, then an appellate tribunal should be
   given early opportunity to confirm it as promptly as possible, and to
   abort any remedial measures before they have become irreversible as a
   practical matter.

   Second, there is credible evidence in the record to suggest that
   Microsoft, convinced of its innocence, continues to do business as it
   has in the past, and may yet do to other markets what it has already
   done in the PC operating system and browser markets. Microsoft has
   shown no disposition to voluntarily alter its business protocol in any
   significant respect. Indeed, it has announced its intention to appeal
   even the imposition of the modest conduct remedies it has itself
   proposed as an alternative to the non-structural remedies sought by
   the plaintiffs.

   Third, Microsoft has proved untrustworthy in the past. In earlier
   proceedings in which a preliminary injunction was entered, Microsoft's
   purported compliance with that injunction while it was on appeal was
   illusory and its explanation disingenuous. If it responds in similar
   fashion to an injunctive remedy in this case, the earlier the need for
   enforcement measures becomes apparent the more effective they are
   likely to be.

   Finally, the Court believes that extended proceedings on the form a
   remedy should take are unlikely to give any significantly greater
   assurance that it will be able to identify what might be generally
   regarded as an optimum remedy. As has been the case with regard to
   Microsoft's culpability, opinion as to an appropriate remedy is
   sharply divided. There is little chance that those divergent opinions
   will be reconciled by anything short of actual experience. The
   declarations (and the "offers of proof") from numerous potential
   witnesses now before the Court provide some insight as to how its
   various provisions might operate, but for the most part they are
   merely the predictions of purportedly knowledgeable people as to
   effects which may or may not ensue if the proposed final judgment is
   entered. In its experience the Court has found testimonial predictions
   of future events generally less reliable even than testimony as to
   historical fact, and cross-examination to be of little use in
   enhancing or detracting from their accuracy.

   In addition to its substantive objections, the proposed final judgment
   is also criticized by Microsoft as being vague and ambiguous.
   Plaintiffs respond that, to the extent it may be lacking in detail, it
   is purposely so to allow Microsoft itself to propose such detail as
   will be least disruptive of its business, failing which plaintiffs
   will ask the Court to supply it as the need appears.

   Plaintiffs won the case, and for that reason alone have some
   entitlement to a remedy of their choice. Moreover, plaintiffs'
   proposed final judgment is the collective work product of senior
   antitrust law enforcement officials of the United States Department of
   Justice and the Attorneys General of 19 states, in conjunction with
   multiple consultants.(2)
   These officials are by reason of office obliged and expected to
   consider - and to act in - the public interest; Microsoft is not. The
   proposed final judgment is represented to the Court as incorporating
   provisions employed successfully in the past, and it appears to the
   Court to address all the principal objectives of relief in such cases,
   namely, to terminate the unlawful conduct, to prevent its repetition
   in the future, and to revive competition in the relevant markets.
   Microsoft's alternative decree is plainly inadequate in all three
   respects.

   The final judgment proposed by plaintiffs is perhaps more radical than
   might have resulted had mediation been successful and terminated in a
   consent decree. It is less so than that advocated by four
   disinterested amici curiae. It is designed, moreover, to take force in
   stages, so that the effects can be gauged while the appeal progresses
   and before it has been fully implemented. And, of course, the Court
   will retain jurisdiction following appeal, and can modify the judgment
   as necessary in accordance with instructions from an appellate court
   or to accommodate conditions changed with the passage of time.

   It is, therefore, this _____ day of June, 2000,

   ORDERED, that the motion of defendant Microsoft Corporation for
   summary rejection of the plaintiffs' proposed structural
   reorganization is denied; and it is

   FURTHER ORDERED, that defendant Microsoft Corporation's "position" as
   to future proceedings on the issue of remedy is rejected; and it is

   FURTHER ORDERED, that plaintiffs' proposed final judgment, as revised
   in accordance with the proceedings of May 24, 2000 and Microsoft's
   comments thereon, be entered as a Final Judgment herein.

                           ______________________
                          Thomas Penfield Jackson
                            U.S. District Judge

   1. Despite their surprise, compounded no doubt by the Court's refusal
   on May 24th to allow discovery and take testimony on the issue,
   Microsoft's attorneys were promptly able to tender a 35-page "Offer of
   Proof," summarizing in detail the testimony 16 witnesses would give to
   explain why plaintiffs' proposed remedy, in its entirety, is a bad
   idea. Within a week they added seven more.

   2. Two states dissented from the imposition of structural remedies but
   fully supported the remainder of the relief proposed. The absence of
   total unanimity merely confirms the collaborative character of the
   process by which the proposed final judgment was formulated.

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