MS/DOJ: Government Rests Its Case

As Microsoft prepares to launch its defence against the government's charges that it controls a software monopoly, the proposed America Online-Netscape merger is once again taking a prominent role in the historic case.

U.S. District Judge Thomas Penfield Jackson has been considering whether the $US4.2 billion AOL-Netscape deal is, as Microsoft contends, proof that the software giant still has robust competitors.

This week, Jackson noted a column in The Washington Post in which AOL Chairman and CEO Steve Case was quoted as saying, "AOL's merger with Netscape has no bearing on the Microsoft case, as nothing we're doing is competitive with Windows. We have no flight of fancy that we can dent in any way, shape, or form what is a [Microsoft] monopoly in the operating system business."

As Microsoft's legal team questioned the government's economic expert, Franklin Fisher, about the AOL-Netscape deal, which also includes a browser licensing deal with Sun Microsystems, Jackson expressed an interest in the AOL chief.

"I take it there are no plans on the part of either party to call Mr. Case," Jackson said.

"Not at this time, your honour, but we each have our rebuttals [witnesses]," said Microsoft attorney John Warden. Each side will be allowed to call as many as two rebuttal witnesses near the trial's end.

Microsoft attorney Michael Lacovara tried to get Fisher to concede that the deal was a competitive threat to Microsoft -- which has cited the merger, along with the development of the Linux OS, network computers, and the Java programming language, among other things, as proof that Microsoft faces many potent competitive threats.

Lacovara cited a transcript of the Nov. 24, 1998, press conference held by AOL, Netscape, and Sun to announce the agreement, during which Case said AOL planned to "aggressively develop and promote Netscape's browser." But Fisher remained steadfast in his view that Microsoft has created a monopoly that will not be easily threatened.

"They didn't eliminate for all time any possible threat," Fisher said about Microsoft. But the company -- especially in regard to Java and Netscape's browser -- took steps to ensure that "what they saw as a threat didn't materialise very fast," Fisher said.

Fisher, the government's last witness, should wrap up his testimony this week. Microsoft is scheduled to begin its defence this week, with economist Richard Schmalensee, interim dean of the Sloan School of Management at the Massachusetts Institute of Technology -- taking the stand.