Gates says he'll fight judge's ruling that Microsoft broke law

Tuesday, April 4th 2000, 12:00 am

By: News On 6

WASHINGTON (AP) -- Microsoft Chairman Bill Gates is vowing to fight a federal court decision that his company violated U.S. antitrust laws by mounting a "deliberate assault" on competition in the Internet browser market. The ruling could lead to drastic punishment, including the breakup of one of the world's major corporations.

"Microsoft placed an oppressive thumb on the scale of competitive fortune, thereby effectively guaranteeing its continued dominance," U.S. District Judge Thomas Penfield Jackson wrote in a sweeping decision that said Microsoft violated the Sherman Act, the same law used to break up monopolies from Standard Oil to AT&T.

The judge issued his ruling Monday after the stock market closed, but word that it was coming caused Microsoft stock to drop by more than $15 a share to $90.871/2, costing Gates about $12.1 billion in paper losses.

Gates, the super-competitive Harvard University dropout who in 25 years built Microsoft into a multibillion-dollar empire that dominates the personal computer software market, immediately promised to appeal.

"We believe we have a strong case," he said. "This ruling turns on its head the reality that consumers know: That our software has helped make PCs accessible and more affordable to millions of Americans."

Sen. John McCain, R-Ariz., chairman of the Senate Commerce Committee, said on NBC's "Today" that he will hold hearings on the case. "I think it is the role of Congress to assess two things: one, the impact on the consumer of such action that might have to be taken on the part of Microsoft; and, two, what is the impact on this incredible engine that's driving America's economy?"

Jackson's ruling came days after settlement talks broke down between the Redmond, Wash.-based company and government lawyers, but both sides Monday still left the door open to an agreement.

Justice Department antitrust chief Joel Klein said he was willing to consider a settlement as long as it resolved the violations Jackson cited. Microsoft Chief Executive Steve Ballmer said the company would be open to more negotiations but it "would need to see an appropriate openness" from the government.

If no agreement is reached, Jackson will begin considering what penalty to impose, possibly by summer. The options range from breaking up the company whose Windows operating system runs most of the world's personal computers to forcing it to share its software code with competitors.

Microsoft's appeal of the judge's decision could take years, postponing the effect of any penalty. The 19 states that joined the federal government in suing Microsoft also can seek penalties under their own anti-competition laws.

Monday's decision affirms Jackson's previous ruling in November that the software giant is a monopoly that illegally bullied competitors and stifled innovation, hurting consumers in the process.

The judge said Microsoft was guilty of "unlawfully tying its Web browser" to Windows. "Microsoft mounted a deliberate assault upon entrepreneurial efforts that, left to rise or fall on their own merits, could well have enabled the introduction of competition into the market," Jackson wrote. "Microsoft's anti competitive actions trammeled the competitive process through which the computer software industry generally stimulates innovation."

Microsoft didn't lose all of the case: Jackson ruled that the government failed to prove that Microsoft's exclusive marketing arrangements with other companies violated federal antitrust law.

The Justice Department vowed to press the case until consumers are rewarded.

"Thanks to this ruling, consumers who have been harmed can now look forward to benefits," Attorney General Janet Reno said.

Attorneys general for the states that joined the case called for strict sanctions. Connecticut Attorney General Richard Blumenthal urged Jackson to "adopt remedies that are as far-reaching and fundamental as Microsoft's abuses of its monopoly."

Consumer advocate Ralph Nader said, "The judge has laid the foundation for the breakup of Microsoft. Anything less than that will be like a thundering elephant emitting the squeak of a mouse."

However, Gates said, "As we look ahead to the appeals process, innovation will continue to be the number one priority at Microsoft. ... It's important to note how much the high technology industry has changed just in the two years since this case has been filed."

In an interview published in The Wall Street Journal before Jackson released his ruling, Gates said that regardless of what th ejudge decided, his company would continue to integrate the Internet into its Windows software, even though that linkage was at the core of the Justice Department lawsuit.

Klein told reporters Microsoft's violations occurred after the company reached an agreement with the Justice Department in a previous case about five years ago. The government will seek a remedy that "ensures that we not have this continued pattern of antitrust violation," he added.

Both sides in the case had reasons to seek a settlement. For Microsoft, the verdict is expected to spur more consumer lawsuits. Microsoft already faces dozens of class-action lawsuits seeking potentially billions of dollars in damages.

For the government, an out-of-court settlement could have meant immediate sanctions against Microsoft. Such relief would be delayed with a lengthy legal battle in federal appeals court, and the U.S. attorney general's office will be under a new administration by then.