Newsmaker: Joel Klein

June 8, 2000 at 12:00 AM EDT

JIM LEHRER: The Microsoft breakup ruling, day two. Joel Klein, the assistant attorney general who heads the Justice Department’s antitrust division, is here now for a Newsmaker interview. Mr. Klein, welcome.

JOEL KLEIN: Thank you, nice to be with you.

JIM LEHRER: Any second thoughts 24 hours after the judge’s decision that he did the right thing?

JOEL KLEIN: No, I think he did the right thing. I think history will show that he did the right thing, I’m confident about it. It’s a strong remedy but one that’s proportional to the circumstances, Jim, and I think it will bring real benefits to consumers.

JIM LEHRER: There is no other option to breakup?

JOEL KLEIN: Well, I think there are always a variety of options. We considered a variety of options. I’m convinced that is the appropriate one. Let me say why. The people have talked about conduct remedies, ways to regulate Microsoft’s behavior. But that is inevitably going to be very intrusive and very long standing. And the virtue of this remedy is essentially to let market forces work in a way that will stimulate competition and innovation.

JIM LEHRER: Make sure I understand that. If the judge had let or you had let Microsoft stay as it is, as one big company, and then gone in and tried to change their practices, you think that would have been worse than dividing it into two companies?

JOEL KLEIN: I think ultimately that would prove to be more intrusive, more court involvement. You know, in general, and I think this is sensible, there’s a movement toward deregulation. We’re seeing more a more reliance on market-based forces. And I think this remedy, while to be sure it’s a substantial remedy, I don’t want to make light of it, it’s a big thing, but it is a one-time division that will then enable the companies to grow and move on. If you think about it — think about the AT&T breakup again. You know how long they tried to regulate AT&T? They had a Federal Communications Commission, they had the state regulators, and the thing got more and more, the books got bigger and bigger, started to like the tax code. The federal courts can become that kind of regulatory agency and that could be a drag on the sale. Look at the benefits to the market, look at the benefits to consumers. You see companies now, I was just reading a story today in the paper about Hewlett-Packard broke off Aliant — bigger companies than what we’re talking about in terms of employees here, and they’re moving ahead, prospering, so I think this is really the right way to go.

Microsoft lost the case…

JIM LEHRER: An analyst was quoted in the Washington Post this morning as saying, “it wasn’t so much that the Department of Justice won this trial, Microsoft lost it, it’s going in for a speeding ticket and coming out with a death sentence.” Does he have it right?

JOEL KLEIN: No, I don’t think he did. I think the facts are what won this trial. I think it’s very rare to see a case where you have this kind of very detailed factual record. The large majority of it coming from Microsoft’s own files, its own e-mails, layed out before the court, its own witnesses, testifying that we didn’t want to compete on the merits because we knew we couldn’t win — so in the end I think people always like the theatrics of a trial. You know, we’ve gotten into this world now where people like the television hovers over the trial and the courtroom and they play little pieces. But I think what the virtue of this thing is, is the record is that thick, that comprehensive, and the judge’s opinion tells a tale, paints a mosaic that I think is enormously powerful.

JIM LEHRER: Was breaking up Microsoft your goal when this whole thing started?

JOEL KLEIN: No, my goal was first to make sure that we prevailed at the trial and to get a measure of what the scope of the violations were, because you have to have a remedy that talks to the violations. You know, there are a lot of people speculate what’s the right thing for the industry. Ours is a law enforcement measure. Once we knew what the judge was going to do, the severity of the violations, coupled with Microsoft’s continuing refusal to really make any efforts to comply with the anti-trust laws – it’s a startling fact, Jim — in America today, many serious companies, big companies have very sophisticated anti-trust compliance programs. It’s routine. Microsoft, despite all the troubles that it’s been through, doesn’t have such a program.

JIM LEHRER: Do they literally just stiff you all, did you have no relationship at all with Microsoft through this four years or so?

JOEL KLEIN: I wouldn’t say they stiffed us, I think their basic attitude was, we’ll do what we need to do to protect our monopoly, and then we’ll worry about the government and litigation later. I think that is the company’s modus operandi.

JIM LEHRER: So the judge was right had he said there was never any acknowledgement on Microsoft’s part that they violated the law or had any reason to be sorry for what they had done?

JOEL KLEIN: I think that’s been as clear as could be. And more importantly, they’ve sort of walked away from the facts and the evidence in this case.

Microsoft’s practices

JIM LEHRER: Refresh us on the history here. How did the Justice Department get on with this in the first place? What caused you to think there had been a violation of the anti-trust laws?

JOEL KLEIN: Well, let me say two things. First of all, in the time I’ve been there, there have been several matters brought to us by different people throughout the industry, complaining about Microsoft’s practices. In most instances, we have declined to pursue that. This particular matter came to us early in my tenure when Netscape was concerned about Microsoft’s practices with respect to the browser. We did a —

JIM LEHRER: Netscape was a browser company. Explain what a browser is.

JOEL KLEIN: A browser is a piece of software used to access the World Wide Web, and Netscape was then the dominant player in that particular technology. And Microsoft realized that a browser was a real threat to the operating system, this is a Bill Gates memorandum random saying that, and they automatically decided they had to win the browser war. That became their, quote, priority number one for the Microsoft company because they needed to protect the operating system. You know, the operating system sells hundreds of millions of copies that make billions of dollars on this thing, and they’ve got a really strong monopoly position. And they were worried about the browser. So what they went about and did was tied up all the deals with exclusive dealing contracts so Netscape couldn’t get distributed. Then they tied their browser to their operating system, so every time you bought an operating system, it came with a Microsoft browser. As a result of that, there was no room for Netscape.

JIM LEHRER: So you looked at that and said, hey, that’s a violation of law. Let’s go.

JOEL KLEIN: We talked to numerous industry participant, took lots of depositions and testimony and looked at the Microsoft documents, then put together the case and filed it in court.

JIM LEHRER: Did you go to Microsoft before you filed the case and say look what you’re doing, you’re violating the law, stop it and we’ll leave you alone? Don’t stop it and we’ll file this case?

JOEL KLEIN: Well, we certainly went to, and we told them what we were going to do, we proposed a settlement to them, which they rejected before we filed the case. We delayed filing the case for several days because we had proposed a settlement, and they stiffed us.

JIM LEHRER: Was it a settlement that involved breaking up the company?

JOEL KLEIN: No, sir.

JIM LEHRER: What could they have had early on?

JOEL KLEIN: I think the specifics of it are not appropriate to comment on. But essentially it was a settlement that would have said, look, compete on the merits, give other people an opportunity to bring their product to market, let the consumer win. Microsoft says it had the best technology. My view is, if it does and they compete on the merit, that’s good for consumers, but they didn’t want to do that.

An expedited appeal

JIM LEHRER: You’ve asked for an expedited appeal, skipped the appeals court, and go right to the Supreme Court. Why?

JOEL KLEIN: I think for two reasons, one, Congress passed a special statute for just this kind of case, because of the importance to the economy, the importance to the company, that the high court, the highest court in our land should get into the case early so that we can get it resolved. Second of all, I think the importance of this case, and the rapidity with which this industry moves generally, leads me to conclude that we would like to see the problem fixed sooner, rather than later.

JIM LEHRER: Not influenced by the fact that this particular appeals court hears cases from the District of Columbia has not looked favor my on a lot of Judge Jackson’s decisions in the past? In other words, you’re not skipping an unfavorable court?

JOEL KLEIN: Not at all. It’s a simple matter of extradition. Thinks an appeals court in which we’re very familiar with the government and generally fared well, and obviously if it weren’t for the pressures of trying to resolve this, you know, it’s always paradoxical, here’s Microsoft. They are under a court order to break up. They have all their employees, all their shareholders, a whole industry that’s affected by this. This is significant stuff. Why wouldn’t they want it expedited? After all the Supreme Court is the highest court in the land. It is likely that the court is going to be called onto resolve this case one way or the other. There are nine Justices there, nobody could question their impartiality or integrity. I’m astonished that Microsoft wouldn’t be joining with us.

JIM LEHRER: What about, is your phone, you’re still taking calls from Microsoft that they say, they have a revelation and say, wait a minute, let’s not press this any more, let’s accept it, would you sit down and talk to them?

JOEL KLEIN: Absolutely. I have always believed, continue to believe the best resolution of litigation of this sort is cooperative resolution through settlement.

JIM LEHRER: Would it have to involve a breakup?

JOEL KLEIN: I would say this, Jim, I don’t think it’s appropriate for me to negotiate here on television. But I think there are benefits to a breakup, precisely for the reason we discussed earlier today. But if Microsoft is prepared to engage seriously, and here’s the key point, if they’re not willing to look at this court’s 208 pages of findings and realize these are serious anti-competitive practices, if they don’t want to engage on that level, if they want to tell me that this is all about nothing and take the position that they’ve taken Up until now that this is just competition on the merits, then there’s no purpose. If they want to address those problems in a real way, absolutely.

A lasting message

JIM LEHRER: What message should American business take from this decision yesterday?

JOEL KLEIN: I think they should take two important messages. Number one, as a general matter, Jim, I don’t think that most American businesses need be concerned about anti-trust, because I think they conduct their practices within the law. On the other hand, I do think the notion that anything goes, even in the new high tech economy, is a notion that is very corrosive and insidious. It will be harmful to our markets, harmful to our consumers and ultimately harmful to our economy. When you use economic power to muscle people, to basically coerce people to stay out of the market, to basically tie up distribution channels, when that occurs, and it doesn’t occur very often, but when it occurs, you can count on the United States Department of Justice and I believe the federal courts to put a stop to it.

JIM LEHRER: What do you say to people who say, wait a minute, Klein, this is a special situation, technology is growing so fast and so big, it’s not just Microsoft, there’s Cisco Systems that dominates the hardware business, there’s AOL and Time Warner coming together, is the anti-trust division of the Justice Department the avenue to resolve these things?

JOEL KLEIN: When there’s illegal activities, it’s happened for 110 years, it’s made America’s economy the strongest, most competitive economy in the world. The rest of the world is running to catch up to anti-trust enforcement. And there’s nothing new about this kind of thing. This high tech field in which you’re talking about, the same speed with which it moves also means that innovation can be increasingly deterred. Take the situation now when we have a situation when Microsoft has a monopoly on the desk top, every server talks to a desktop computer. If Microsoft favors its servers by allowing it to have contact with its desktop computer and disfavors other servers, they can extend their monopoly in that direction. Hand held devices, they can do the same thing. If they play by the rules and compete on the merits, they’re a great company with a powerful position, they should compete fairly, and if they win they win. But you can’t have them muscling people, withholding technical information, tying products together, the kind of things that happened here.

JIM LEHRER: Finally, on a personal level, are you proud of what you’ve done in this case?

JOEL KLEIN: I’m proud of the Justice Department and I’m proud of the judicial system, absolutely. You know, Jim, I’ve practiced law a long time, people are awfully cynical about institutions in America. And I think the United States Department of Justice and the attorney general’s leadership was an extraordinary team, and the antitrust division showed that we know how to try cases, we know how to do investigations, and the federal court system was able to move quickly, fairly, and thoroughly and appropriately. So as a lawyer and as an officer of the court, I am proud of what we’ve accomplished here.

JIM LEHRER: Are you comfortable with the possibility that for now and forever more you will be known as the guy who broke up Microsoft?

JOEL KLEIN: Well, you know, in personal terms, I think when you get thrown into a job like this, you enforce the law to the best of your ability, and you let commentators like you try to characterize it.

JIM LEHRER: Joel Klein, thank you very much.

JOEL KLEIN: Thank you.

JIM LEHRER: Senior Microsoft officials were unavailable tonight, but we hope to interview one of them in the next few days.