Economist: Microsoft Sanctions Should Look Ahead

Microsoft Corp.

Carl Shapiro, a former antitrust official with the U.S. Justice Department, said remedies in the case should "restore competition" in the software business by preventing Microsoft from dominating new technologies that threaten its Windows monopoly in personal computer operating systems.

"Under these circumstances an effective remedy must be forward-looking and not merely focus on the particular products or technologies that posed a threat (to Windows) five years ago," Shapiro told U.S. District Judge Colleen Kollar-Kotelly.

Shapiro's testimony is central to the argument advanced by the nine states that have refused to sign onto the Justice Department's proposed settlement with Microsoft.

The nine dissenting states are asking the judge for sweeping sanctions that they say would restrain Microsoft from dominating new technologies that have emerged since the landmark antitrust case was filed four years ago.

Microsoft argues remedies in the case cannot go beyond specific wrongdoing upheld by a federal appeals court last year, mainly that Microsoft tried to crush Netscape's Internet browser in an effort to preserve the Windows monopoly.

Shapiro is the 15th witness called by the nine states seeking tough antitrust remedies against Microsoft for illegally maintaining its Windows monopoly.

A professor at the University of California at Berkeley, Shapiro served during 1995 and 1996 as the Deputy Assistant Attorney General for Economics under the Clinton administration that brought the case against the software giant.

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In his testimony, Shapiro said the judge should "prevent Microsoft from using its Windows monopoly to disadvantage products in adjacent markets that could, over time, play a role in undermining the dominant position of Windows."

Shapiro said Microsoft had killed off a "rare and serious threat" to Windows by crushing Netscape's Navigator browser and hobbling Sun Microsystems Inc.'s Java programming language.

"We simply cannot replicate the powerful combination of factors that threatened Microsoft's Windows monopoly six years ago," Shapiro said. "The clear implication: A broader remedy is required to truly restore competition."

Shapiro told the judge Microsoft should be required to give "parity" to other software companies -- the ability to make their add-on "middleware" work just as well with Windows as Microsoft's own products.

He also singled out Web-based services as the most serious threat to the Windows monopoly since 1998, when a federal judge first ruled that Microsoft violated antitrust laws.

Microsoft is developing its .NET services that reside on an Internet server rather than in software on the user's computer. Company officials have said .NET is key to Microsoft's future.

"The clear implication of these trends is that the remedy should place great emphasis on making sure that Microsoft cannot use its Windows monopoly to impede the ability of non-Microsoft servers to compete effectively and to serve up applications to desktops," Shapiro told Kollar-Kotelly.

Earlier in the week a Sun Microsystems executive told the judge that unless tough antitrust restrictions are imposed on Microsoft, it can use its Windows operating system monopoly and dominant Internet Explorer Web browser to promote .NET over competitors like Sun's Java programming language.

Shapiro also told the judge that it's important to make sure that Microsoft's Office software be made available on non-Microsoft operating systems.

Microsoft is expected to call its first witness next week in the hearings that are now in their fourth week, but it is not clear who that will be. Both Microsoft Chairman Bill Gates and Chief Executive Steve Ballmer have been listed among the 13 company employees listed as expected witness.

Kollar-Kotelly is also considering whether to endorse the proposed settlement of the case. Hearings are expected to run at least through May at their current pace.

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