Big Day for DoJ: Opens AOL Probe, Shreds MS Witness; Press Gleeful

Jan 15 1999

If you're Steve Case, you woke up this morning to good news and bad news. First the bad: The Justice Department is looking into the antitrust ramifications of your merger with Netscape. The good? You're clearly at the helm of a company at least as important as Microsoft to the nation's digital future. Of course, that ego boost won't pay the legal bills or boost your stock, and according to Kara Swisher and Paul Sherer in today's Journal, the government is looking at how the deal might affect competition in the future. But hey, you guys asked for it didn't you, when you and Jim Barksdale insisted that any company with a lock on a goodly portion of the biz was a threat to the general public, remember?

Speaking of which, the Microsoft trial continued onward as Redmond's expert testified that Windows is under almost constant threat from competitors. Richard Schmalensee, dean of the Sloan School at the Massachusetts Institute of Technology , took the stand for a second day and insisted that the likes of Apple 's OS, Linux, Java and the Palm Pilot are serious threats to dominance.

There was a tense Perry Mason moment when DoJ legal eagle David Boies ripped into the academic, and got him to concede that none of the products, according to the Journal, "yet amount to viable alternatives for use by major personal-computer makers on new machines."

As MSNBC's Brock Meeks described it, Schmalensee "weathered" the attack as he was "grilled" by Boies. But Schmalensee danced free with lines like: "It's a characteristic of this business that competitors come out of nowhere." But Boies followed up with an old law journal article by Schmalensee playing up how important it is to maintain low barriers to entry. The government lawyer also got the dean to admit he had no idea how a survey he cited was conducted and then, as Meeks put it, "dropped a bomb" on him, saying that Gates had ordered the survey to prepare for congressional testimony.

The Washington Post's team of Rajiv Chandrasekaran and Mark Leibovich also focused in heavily on Schmalensee's Harvard article, saying his words in the early '80s had "come back to haunt him" on the stand. The Post focused on the prof's law school days concept of "excess profits" and how they often showed a "clear impediment" to competition. The reporters obviously loved the trap Boies had set and sprung - it's not often you get to hear a witness say things like this: "My immediate reaction is 'What could I have been thinking?'"

In fact, Boies' somewhat successful attack had reporters acting like sleepy sharks suddenly tasting blood in the water, and they filed some of their best stuff in weeks. The Times' Joel Brinkley described the government's "broad attack" on the witness with plenty of drama, and played up the cooked Gates survey. The smoking gun? A Gates e-mail: "It would HELP ME IMMENSELY to have a survey showing that 90 percent of developers believe that putting the browser into the operating system makes sense. ... Ideally we would have a survey before I appear at the Senate on March 3rd."

One outlet, however, TechWeb, played down the courtroom fireworks in favor of another Microsoft story - its appeal of a judge's injunction on Java. Lee Pender found import in an escalation of the war between Microsoft and Sun Microsystems. The MS appeal accused a judge of misinterpreting the contract between Sun and Redmond when he ordered Microsoft to bring its version of Java in line with Sun's.

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