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[FYI] (Fwd) FC: Judge Jackson slams Microsoft: Break 'em up!

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Date sent:      	Wed, 07 Jun 2000 16:37:41 -0400
To:             	politech@vorlon.mit.edu
From:           	Declan McCullagh <declan@well.com>
Subject:        	FC: Judge Jackson slams Microsoft: Break 'em up!
Send reply to:  	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

                           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

    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

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