[Congressional Record (Bound Edition), Volume 145 (1999), Part 14]
[Senate]
[Pages 19863-19865]
[From the U.S. Government Publishing Office, www.gpo.gov]



                               MICROSOFT

  Mr. GORTON. Mr. President, as we approach the August recess, my 
constituents at Microsoft face the task of battling the Department of 
Justice, DoJ, as well as their competitors in the courts, while 
continuing to run one of the most successful companies in one of the 
most competitive industries in American history. I would like to share 
some interesting developments that have arisen since I last took to the 
floor of the U.S. Senate to speak to this issue.
  Specifically, USA Today recently reported that the Department of 
Justice is inquiring as to how a possible breakup of Microsoft could be 
implemented. According to USA Today, unnamed senior officials at DoJ 
have requested a complex study, which would cost hundreds of thousands 
of dollars, to assess where Microsoft's logical breakup points would 
be.
  Mr. President, this seems to be putting the cart before the horse. I 
would hope that the Department of Justice has more important things on 
which to spend the taxpayers' money. If not, I am aware of several 
programs included in the Commerce, Justice, State Appropriations bill 
that could use additional funding.
  To put the premature nature of this action in perspective, the 
findings of fact that summarize the points that each side made during 
the testimony aren't even due until next week. After Judge Penfield 
Jackson has had an opportunity to review these documents, the two sides 
will present closing arguments. Following the closing arguments, Judge 
Jackson will issue his ``proposed findings of fact.'' In response, the 
government and Microsoft will prepare another set of legal briefs to 
argue how antitrust law applies to the facts. Judge Jackson then will 
hear additional courtroom arguments, and finally issue his 
``conclusions of law'' around November.
  Should Judge Jackson rule against Microsoft, a verdict with which I 
would vehemently disagree, another set of hearings on possible 
``remedies'' would need to be held. Those proceedings could last 
several weeks and involve additional witnesses, which would put a final 
decision off until sometime next spring. Microsoft almost certainly 
would appeal its case to U.S. Court of Appeals and possibly all the way 
to the Supreme Court--pushing the time frame out another two years.
  Although the timing of this DoJ action is premature, the most 
intriguing aspect of the July 29, 1999 USA Today article was that the 
two investment banking firms approached by the DoJ to study the breakup 
of Microsoft declined the invitation. According to the story, both 
firms were ``worried about the impact of siding with a Justice 
Department that they say is viewed in the business community as 
interventionist.'' If Microsoft were a monopoly, and stifling growth in 
the Information Technology sector, it seems to me that these technology 
investment banks would have jumped at the chance to downsize Microsoft 
in order to open the market to competition, therefore increasing 
investment opportunities. This is obviously not the case.
  Far from being guilty of the charges levied against it, Microsoft is 
actually winning cases brought by other firms charging anti-competitive 
behavior. Connecticut-based Bristol Technology Inc., which manufactures 
a software tool called Wind/U, filed a federal antitrust suit against 
Microsoft on August 18, 1998. Bristol accused Microsoft of ``refusing 
to deal'' because Microsoft wouldn't license the source code for 
Windows NT 4 under Bristol's proposed more favorable terms. Despite 
never having made more than $1.5 million in net profits in their best 
year, Bristol was seeking up to $270 million in monetary damages.
  Not unlike the suit brought by the DoJ against Microsoft, the Bristol 
case seemed to be driven more by those trying to gain competitive 
advantage than by violation of antitrust law. Bristol hired a Public 
Relations firm to set out its ``David vs. Goliath'' PR campaign while 
supposedly negotiating in good faith with Microsoft. A member of 
Bristol's Board of Directors went so far as to send an email to the CEO 
and senior management discussing what Bristol was then referring to as 
the ``we-sue-Microsoft-for-money business plan,'' which he proposed 
might be funded by Microsoft competitors.
  I see it as a disturbing trend to have litigation used as a get rich 
quick scheme instead of protecting ordinary citizens from harm. It is 
particularly disturbing that the United States government aids and 
abets this distortion of the American legal system. The insistence of 
the Department of Justice on continuing its case, in the face of 
overwhelming evidence that consumers have not been harmed, not to 
mention

[[Page 19864]]

that the industry is booming, sets a poor precedent for Americans to 
follow and can only serve to encourage this behavior.
  Fortunately, Bristol's hometown jury took less than two days to 
return a unanimous verdict. Every one of the antitrust charges were 
dismissed.
  As gratifying as the jurors' common-sense decision was in the Bristol 
case, they did find against Microsoft on one count--and awarded Bristol 
one dollar in damages. Mr. President [pull out dollar bill?], I would 
suggest that the Bristol jurors got it exactly right. In fact, I think 
that's a pretty good precedent to follow in the DOJ case: assess 
Microsoft one dollar per indecorous email submitted by government 
lawyers as ``evidence'' and maybe the total will be a few hundred 
dollars or so. That wouldn't really give taxpayers much of a return on 
the estimated $30 to $60 million dollars this lawsuit has cost them, 
but no matter: what's a few million taxpayer dollars in the pursuit of 
that most critical of federal mandates, enforcing corporate etiquette?
  Mr. President, I ask that an article from the August 5th Investor's 
Business Daily addressing this issue be printed in the Congressional 
Record after my remarks.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See Exhibit 1.)
  Mr. GORTON. Another interesting development that has arisen since my 
last speech is the controversy regarding instant messaging technology. 
Instant messaging, which allows people to chat in real-time with a 
select list of agreed-upon users, has become the hottest new on-line 
application. With over 100 million users, instant messaging shows how 
the Internet is changing the dynamic of the Information Technology 
industry.
  Let me give you a brief description of the controversy. AOL, 
Microsoft, Prodigy, and Yahoo all have developed competing instant 
messaging technology. Unfortunately, users of these competing versions 
could not communicate with each other until Microsoft, Prodigy, and 
Yahoo released versions of this technology that allow their users to 
talk to AOL users. AOL responded by shutting out the competition and 
complaining that the competing technology was the equivalent of hacking 
into the AOL system. This is the equivalent of MCI and Sprint users not 
being able to place long distance calls to one another.
  Over the last two weeks, AOL and Microsoft have been engaged in a 
duck and parry routine over the ability of competing technologies to 
access AOL users, with Microsoft creating new versions as fast as AOL 
could block them. I hope that the two sides can come to an agreement 
soon on the development of an industry standard which will allow for 
open competition in the marketplace.
  With AOL having a 20-1 advantage over the nearest rival in the field, 
they must hope that Milton Friedman's admonition regarding the 
``suicidal tendencies'' of some in the industry in supporting the DOJ's 
intervention doesn't prove prophetic. I hope that the Justice 
Department does not feel the need to get involved. This industry, which 
is changing and advancing so rapidly, doesn't need the government to 
lay down speed bumps in the road. The federal government should be 
fostering growth and monitoring the progress, allowing the smooth flow 
of the traffic of commerce to continue unimpeded.
  Mr. President, I ask unanimous consent to print a recent Wall Street 
Journal article in the Record that illustrates many of the points I 
have made regarding the absurdity of the DoJ's case against Microsoft. 
Once again, I implore my colleagues to join me in denouncing this 
folly.
  There being no objection, the material ordered to be printed in the 
Record, as follows:

             [From the Wall Street Journal, June 30, 1999]

                       (By Holman W. Jenkins Jr.)

       The evidentiary phase of the Microsoft lawsuit wrapped up 
     last week, and it's been an education. If Joel Klein were 
     possessed of any public spirit at all, he would drop the case 
     right now.
       Yet there he was on Thursday, declaiming on the courthouse 
     steps that Microsoft represents a ``serious, serious 
     problem'' that only sweeping Justice Department remedies can 
     fix. ``If you think that Microsoft's operating system 
     monopoly is going to go away in two or three years,'' he 
     added, ``then we shouldn't have brought this case. But I 
     obviously don't believe that.''
       That last bit is lawyer-speak meaning ``In the real world I 
     don't believe what I'm saying, but in court I believe it.'' 
     Mr. Klein doesn't want future clients to think he's a dim 
     bulb.
       He's got a problem. As a matter of law maybe, but certainly 
     as a matter of doing what's right, the evidence and events 
     outside the courtroom have clearly shown Microsoft's 
     ``monopoly'' to be more semantic than real. This month 
     Justice rolled out its latest ringer, an IBM manager who 
     testified Microsoft threatened to withhold a Windows license 
     unless IBM made all sorts of concessions not to promote 
     products that compete with Microsoft's office applications, 
     encyclopedia, etc.
       Uh-huh. When all the palavering was done, IBM said ``no'' 
     and got its Windows deal anyway, and a pretty good deal at 
     that.
       The same was true of the Apple, Intel and AOL witnesses 
     earlier. That's why the government's case has been built 
     entirely on the premise that Microsoft breaks the law merely 
     by engaging in hard bargaining, never mind what bargains were 
     reached or how events played out.
       This might be a good time for Mr. Klein to remember that he 
     works for us, not for Microsoft's competitors. They've been 
     cheerleading for this lawsuit since day one, but they can't 
     afford to mislead the markets the way Justice spins the 
     public. The SEC frowns on CEOs who mislead investors.
       Take Larry Ellison. He was on the Neil Cavuto show talking 
     for the umpteenth time about Bill Gates the bullying 
     monopolist. But he hastily drew a line: ``I mean he's never 
     bullied Oracle. But I certainly . . .''
       When Mr. Cavuto pressed on, suggesting that Oracle must be 
     dead meat now that the ``bully'' has targeted its flagship 
     database software, Mr. Ellison became indignant:
       ``Well, let's look at the facts. Right now, the fastest 
     growing segment of my industry is the Internet. Of the 10 
     largest consumer Web sites, all 10 of them use the Oracle 
     database. In the 10 largest business-to-business Web sites, 
     nine of the 10 use Oracle. None of them use Microsoft. Every 
     single web portal, things like Lycos, Excite, Yahoo!, all use 
     Oracle. None use Microsoft. Microsoft's been in the database 
     business for a decade and they continue to lose. They've been 
     losing share to us at a faster and faster rate over the last 
     several years. In fact, we dominate. We almost have Gates-
     like share in the Internet and it's the Internet that's 
     driving the business.''
       OK, Larry.
       Moving along to Sun's Scott McNealy: His partnership with 
     AOL and Netscape has figured prominently in court, with the 
     government swearing a blue stream that their plans don't 
     ``threaten'' Microsoft. That's not what Mr. McNealy told a 
     trade publication, tele.com, in January. What follows is a 
     lot of jargon, but it means Microsoft has a monopoly in 
     nothing:
       ``We added in Netscape and AOL as distribution channels 
     getting Java 2 into the tens of millions of disks that AOL 
     sends out, so that the world is going to be littered with 
     Java 2, just on the desktop. Then you add in what's going on 
     in Personal Java and Java Card and Java on the server, and 
     all of a sudden we have a very, very interesting, stable 
     volume platform that gives any developer for the telco or ISP 
     community a virus-free, object-oriented, smart card-to-
     supercomputer scalable, down-the-experience-curve platform 
     that allows you to interoperate with every kind of device you 
     can imagine.''
       But nobody spins like AOL's Steve Case. In court, the story 
     is that AOL was ``bullied'' into accepting a free browser 
     from Microsoft (until then, AOL customers had to pay 40 bucks 
     for a Netscape browser). It was ``bullied'' into accepting 
     free placement on every Windows desktop.
       These deals made AOL king of the Internet, dwarfing 
     everybody including Microsoft. Now AOL has bought Netscape, 
     but as Mr. Case will smirkingly tell you, it's up to him to 
     decide when to dump Microsoft's browser and begin promoting 
     Netscape's browser instead.
       When will that happen? When he no longer cares whether 
     Microsoft kicks him off the desktop (meaning when Microsoft 
     can no longer hope to gain anything by kicking him off the 
     desktop).
       AOL has signed up to provide Internet access on the Palm, 
     using a non-Microsoft operating system. Deals are in the 
     works with various smart-phone makers, again bypassing 
     Windows. Mr. Case has spun the court and gullible journalists 
     by saying ``of course'' AOL has no intention of competing 
     directly with Microsoft--which works if your understand of 
     the industry is so skimpy that you believe the relevant 
     threat is another PC operating system.
       But, hark, AOL is going to compete on the desktop too. Last 
     week we learned about talks with Microworkz to launch an AOL-
     branded computer, using BeOS and Linux (i.e., no Windows). 
     Gateway is working on its own Internet computer using the 
     Amiga operating system (yep, the same OS adopted by Commodore 
     in the 1980s).

[[Page 19865]]

       Faster than anyone predicted, the Windows universe is 
     fragmenting. Microsoft built us a common platform by 
     committing itself to a big, bulky, backwards-compatible 
     Windows, and now it's stuck with a platform too big and bulky 
     to be useful for a new generation of devices. These gadgets 
     will run happily on any number of narrowly targeted, code-
     light operating systems, as long as they speak the common 
     language of the Internet. Even Mr. McNealy predicts Windows 
     will have less than 50% of the market by 2002--that is, in 
     ``two or three years.''
       This was in the cards before Justice ever filed its 
     antitrust suit. We pointed out here three years ago that if 
     ``the future of computing is a toaster tied to the 
     Internet,'' the ``death struggle of the operating systems'' 
     is over. We're happy to report that Microworkz is calling its 
     non-Windows machine the ``iToaster.''
       Pursuing this case any further would be nothing but a 
     gratuitous favor to companies that don't want Microsoft to be 
     allowed even to compete. It's time to pull the plug.

                               Exhibit 1

          [From the Investor's Business Daily, August 5, 1999]

                     Case Closed: Lay Off Microsoft

                          (By Paul Rothstein)

       The government's antitrust case against Microsoft continues 
     at a snail's pace. A decision by a U.S. judge is not expected 
     until late this year. In the meantime, eight average citizens 
     in Bridgeport, Conn., have already offered their view in the 
     contest of a lesser known but perhaps equally important 
     antitrust case also involving Microsoft.
       Bristol Technology is a small Connecticut-based software 
     company that offers a product allowing users to run Windows-
     based applications in other operating system environments, 
     including various flavors of Unix. Bristol sued Microsoft in 
     federal court last year, asserting 12 claims for relief under 
     state and federal antitrust laws and seeking as much a $263 
     million in damages.
       Like the government, Bristol alleged Microsoft had an 
     illegal monopoly in the PC operating system market. The suit 
     claimed Microsoft had used it to try to monopolize two other 
     markets--operating system software for ``technical 
     workstations'' and for ``departmental servers.''
       At trial, Microsoft presented a compelling case based on 
     hard facts and evidence illustrating stiff competition from 
     the likes of multibillion-dollar companies like IBM and Sun 
     Microsystems. The competition historically has charged 
     consumers much more than Microsoft does. Microsoft's entry in 
     1993 with Windows NT actually generated significant cost 
     savings for consumers and increased the level of innovation 
     and competition.
       Bristol's hometown jury took less than two days to agree 
     with Microsoft. In a unanimous verdict, the jury quickly 
     dismissed every one of the antitrust charges. It upheld only 
     a minor state claim for which the jury awarded Bristol $1 in 
     ``damages.''
       Although the specific facts are different, basic 
     similarities exist between the Connecticut case and the 
     government's antitrust suit in D.C.
       In both cases, the plaintiffs argued that Microsoft 
     possesses an illegal monopoly with its Windows operating 
     system. Bristol claimed Microsoft's control of the operating 
     system market was so strong and so permanent that any company 
     wishing to produce applications that run on operating 
     systems, must necessarily do Microsoft's bidding. The Justice 
     Department charged that this alleged power was used to thwart 
     competition from Netscape
       In both cases, Microsoft showed that the volatile computer 
     industry is not and cannot be dominated by a single player, 
     even one whose product appears to enjoy widespread 
     popularity.
       Software is so easy to create that anyone with a home PC 
     and a few hundred dollars can enter the market as a viable 
     competitor to IMB, Sun Microsystems, Hewlett-Packard, Compaq 
     and, yes, even Microsoft.
       Just ask Linus Torvalds. He's the creator of the 
     increasingly popular server operating system software called 
     Linux. Torvalds created Linux in the early 1990s in his 
     college dorm room at age 19. Today, the latest International 
     Data Corp. data show Linux with nearly 20% of the server 
     software market and growing.
       The Connecticut lawsuit couldn't show any harm to consumers 
     or competition. The record supported Microsoft's position--
     that its efforts to provide Windows NT has increased choice, 
     increased features and dramatically reduced prices for 
     customers seeking to use high-end PCs and servers.
       Fortunately for all of us, the jury in the Bristol case 
     recognized that antitrust laws are designed to protect 
     competition, not competitors.
       It is unfortunate that the Department of Justice, joined by 
     some state attorneys general, does not share that view. 
     Indeed, another lesson from the Bristol case is that the 
     selective and subjective use of out-of-context e-mail 
     snippets, while perhaps good theater, does not prove an 
     antitrust case.
       Seen in this light, the Bristol jury's verdict ought to 
     concern the government. Why? If the Bristol verdict 
     illustrates anything, it's that eight everyday consumers can 
     recognize the intense level of competition that exists in 
     today's software industry and the obvious benefits of low 
     prices and better products for consumers.
       Given that reality, the government's long battle against 
     America's most admired company is a waste of taxpayer money. 
     It's a flawed proceeding for which consumers clearly have no 
     use.
       By issuing a verdict reaffirming the pro-competitive and 
     pro-consumer nature of today's software industry, the 
     Connecticut jury signaled its support of continued innovation 
     and free-market competition.
       Paul Rothstein is a professor of law at Georgetown 
     University and a consultant to Microsoft who has studied 
     antitrust law under a U.S. Government Fulbright grant.

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