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Joel Klein: An Important Victory

April 4, 2000 at 12:00 AM EDT


RAY SUAREZ: The federal antitrust case against Microsoft was led by Assistant Attorney General Joel Klein, who joins us now. Welcome to the program.

JOEL KLEIN, Assistant U.S. Attorney General: Good evening. Nice to be here.

RAY SUAREZ: Well, I’m sure you read that 43-page ruling very closely. What is your reaction?

JOEL KLEIN: I think it’s a very strong and very important ruling — not only for what it says about Microsoft’s anti-competitive behavior — the significant, pervasive, multifaceted campaign that Microsoft engaged in to harm competitors and ultimately harm the American public by denying them innovation.

But even as importantly, Ray, I think it is a real landmark in anti-trust enforcement. You know, a lot of people have asked the antitrust laws, they’re a hundred years old, what is their relevance for the current information new economy? And I think this court showed through very careful fact finding and very sophisticated legal analysis that antitrust enforcement is going to be important in the information age to deal with exactly the kinds of issues that we saw manifested here in the Microsoft case. So on many fronts I think this truly is an important victory for America’s consumers and for law enforcement.

RAY SUAREZ: For its own part, the company said it would continue to innovate, hope to prevail on appeal and said that in its conclusion, all the things that you say were crimes have actually provided the consumer with convenience, low prices and an industry standard.

JOEL KLEIN: Well, the company can say that but the court heard evidence for 78 days — much of it coming from Microsoft’s own documents — documents that say if we compete on the merits, we’re going to lose in the browser war — documents and testimony, their own witness saying we didn’t want to put our browser right next to Netscape’s browser because we knew we couldn’t win that way. We needed to have exclusive arrangements.

Let me make one thing clear, Ray: I think Microsoft should innovate. I encourage Microsoft to innovate. Nothing in what this case is about would in any way deter Microsoft’s innovation. On the other hand, we want to make sure that Microsoft doesn’t use its monopoly power to prevent others from innovating. The American way is to give that chance to the new entrepreneur, to the new person with the new product to get that product to market and give the public a choice, and then let the best product win. We don’t have a horse in that race.

I’m sorry that Microsoft sort of says, well, we’re just going to go on and do it the same old way. You know, they signed a consent agreement with the Department of Justice in 1994. And they said they were going to — you know — go forward in a constructive way, and then they turned around and engaged in all of this anti-competitive behavior. And I would hope Microsoft would join me in the following two principles: it should innovate; it should play by the rules; it should honor the antirust laws; and it should give everybody else the opportunity to innovate — not to squelch their products through bolting two products together or exclusionary agreements or predatory practices, all of which is carefully documented not just in that 43-page opinion yesterday but in a 200-plus page findings of fact by a federal court who heard all of the evidence.

RAY SUAREZ: But what you call the bolting of two products together, the bundling of the Web browser with the operating system, a court of appeals has already ruled that it finds nothing anti-competitive, nothing illegal about that. Shouldn’t that give Microsoft heart on appeal?

JOEL KLEIN: I don’t think so. I think the court of appeals case was a very different context. The court of appeals itself said of course this might all look very different after we look at the facts. The court of appeals had a consent decree case. This is the anti-trust laws. Now, that’s what the trial was about. You see — you can’t do this on television. One of the things I really urge people is to go on the World Wide Web and pull down these findings of fact and conclusions of laws, so you don’t have to listen to sound bites and spin, because the trial was all about whether there was meaningful product integration, or whether, as the judge found, the two products were bolted together.

You know, we all know if you have a monopoly in Windows and then you bolt another product on there, that’s going to get mass distribution for you. That’s what the evidence said and that was Microsoft’s evidence that said we have got to quote: leverage our Windows monopoly in order to win the browser war. That’s what trials are about and that’s why I think it’s so critical for the American people to really carefully review the court’s findings and conclusions. I think they are really illuminating and informative. RAY SUAREZ: Now, in a structural sense, who has the next move? Is it up to Judge Thomas Penfield Jackson to propose remedies, or for your side, the winning side in this case, to suggest to the court what those might be — similar to a criminal case?

JOEL KLEIN: Sure, I think as a general matter what would happen and I expect it will happen here as well, the court will set a schedule. And then we will propose appropriate remedies to address the issues in the case. And then of course Microsoft would be given an opportunity to react to those remedies and the court would ultimately make a determination of what is appropriate in these circumstances.

RAY SUAREZ: Could you ask for some form of immediate relief, that is, some sort of penalty that would be imposed even as Microsoft goes through its next step in appeal?

JOEL KLEIN: That is certainly an option we have under consideration. No final decision has been made with respect to that, but you could seek interim remedies as well as long-term remedies, depending upon the facts and the circumstances, yes.

RAY SUAREZ: What did your experts advice you — as this case was moving to its conclusion — about what possibly remedy there may be?

JOEL KLEIN: Well, we have had some really terrifically capable consultants, people with a broad range of technological, economic and industry-based information. And they’ve been looking at a variety of proposals. The most important thing here is to get a remedy that makes sure that yesterday’s problems, that the harm that Microsoft did in the market yesterday isn’t repeated tomorrow.

Microsoft used a wide range of anti-competitive devices, not just this bolting of products — exclusionary contracts, refusing to disclose technological information to competitors. We want to make sure going forward that those practices are not repeated and that innovation and competition prevail.

You know, there has been a fair amount of misunderstanding that somehow we’re fighting yesterday’s war and this is a dynamic market. The dynamism of the software market and, in particular, the desktop computing market has been very flat because of Microsoft’s monopoly. They have had a monopoly for as far back as people can remember Windows on the desktop. And they are going to have it for as far forward. How they use that monopoly is absolutely critical to the way we see innovation develop. And we want to make sure tomorrow’s products are not snuffed out the way yesterday’s products were. So that is what our remedy will seek to address.

RAY SUAREZ: But today, the day after the court announced its decision, you can go to the store and find an array of products that didn’t exist or weren’t in wide use when the government began this case. So how does that match up with your assertion that there has been a stifling of these new innovations?

JOEL KLEIN: Well, as the court found, for example, with respect to a critical product, the Internet browser, Microsoft essentially knocked out a platform threat by Netscape with respect to Java, which would have created cross-platform opportunities. Microsoft took that out with respect to an Intel product, Microsoft took that out.

Now, there are lots of products on the periphery that are new and innovative, but when it comes to operating systems on our PCs, there is essentially one product. It’s Windows. And that product has great consequences for the future of computing — for new technologies that Microsoft and only Microsoft can bundle, for access to the Web, Web servers, where so much activity is now going — where Microsoft can favor its server products at the expense of other server products, which could have real competitive consequences, where Microsoft can favor its hand-held devices; these are all of tomorrow’s issues. We just don’t want to see the kind of activities as pervasive and significant because of the competitive threat that we saw to the browser, Java and other products at issue in this case.

RAY SUAREZ: Assistant Attorney General, Joel Klein, thanks for being with us.

JOEL KLEIN: Thank you. My pleasure.