Supreme court nearing Microsoft antitrust decision

"The justices should find it irresistible to discuss whether to take the Microsoft case on expedited appeal," said Hillard Sterling, an antitrust expert at the law firm of Gordon & Glickson. "They know that the worldwide technology and legal communities are eagerly awaiting their determination."

Earlier this year, Microsoft was ruled an illegal monopoly by US District Judge Thomas Penfield Jackson, who ordered the company split in two as a remedy.

Microsoft and the Justice Department are waiting for the US Supreme Court to decide whether it will hear the software giant's appeal of the case, or instead route it first through the US Court of Appeals for the District of Columbia.

Citing a rarely used law called the Expediting Act, Jackson and the Justice Department have asked the Supreme Court to hear the case directly, saying the weighty nature of the case dictates that it be resolved as quickly as possible.

Although Microsoft officials have voiced confidence that the company's appeal will prevail no matter which court initially hears it, they would prefer the case go to the appeals court. The appeals court has ruled in Microsoft's favour before, and observers believe Microsoft covets another favourable decision from that court before the case ultimately is heard by the Supreme Court.

William Kovacic, an antitrust law professor at George Washington University Law School, agreed that a decision likely will come this week. The court's new term begins next week, on October 2.

"My hunch is they'll truly want to talk this one over face-to-face," Kovacic said. "Another hunch of mine is that [the case] goes to the appeals court, but that's a close call."

As the justices met on Monday, a study authoured by a University of Texas at Dallas economist indicated that breaking Microsoft in two will have the opposite effect of that intended by the Justice Department, to foster competition in the software industry.

In his study, "An Expensive Pig in a Poke: Estimating the Cost of the District Court's Proposed Breakup of Microsoft," economist Stan Liebowitz -- a vociferous Microsoft supporter -- also claimed US software prices would increase at least $US50 billion, and as much as $US125 billion, in three years if Jackson's plan to separate Microsoft's Windows operations into a separate company is carried out.

Worldwide, software prices could soar by as much as $US310 billion, he said.

"This estimate reflects a very conservative approach, using conservative assumptions," Liebowitz said in an accompanying statement. "To offset the enormous costs of this forced breakup, the government can offer only the vague promise of possible increased innovation, with neither theory nor data to back up such a claim."

Liebowitz said the two companies created by a court-ordered breakup would have no incentive to stick to Microsoft's current volume pricing strategy, which keeps its software prices low. Also, Liebowitz claimed, other software companies currently keep their prices lower than they would like to compete with Microsoft; if the current Microsoft was broken up, rivals such as Sun and Oracle would raise their prices as well, he said.

Sterling and Kovacic agreed the government's case during appeal would not be affected greatly by the decision last week by Joel Klein, head of the Justice Department's Antitrust Division, to step down at the end of the month.

Douglas Melamed, who has served as Klein's No. 2 man, will assume the post of acting assistant attorney general. President Clinton appointed Klein in 1994.

"Most of the key developments from here on out will largely unfold in the same way whether Joel Klein or Douglas Melamed is in charge," Kovacic said. "Doug Melamed's perspectives and views on this case resemble Joel Klein's. There should be a seamless exchange of the baton in the management of this case."

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Bob Trott

PC World
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