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Court of Appeals Reverses Microsoft Break Up Ruling

Aired June 28, 2001 - 11:41   ET


LEON HARRIS, CNN ANCHOR: We are just now seeing a report crossing on "The Associated Press" wires saying that the federal appeals court that has been hearing the appeal filed by Microsoft against an order to break that company up into three different parts, because of some predatory marketing charge that had been levied against that company, is about to hand down a decision. In fact, they're saying that the court plans to issue a decision today. That could happen any minute now.

We also understand that just moments ago, Microsoft stock is no longer being traded in the markets. So apparently, they are preparing for a decision to be handed down.


DARYN KAGAN, CNN ANCHOR: More breaking news into us here at CNN, about the Microsoft case. "The Associated Press" is reporting that an appeals court is ordering a reversal of the breakup of Microsoft, which had been ordered by a lower court to break up into three separate companies. Microsoft has been appealing that decision, and it appears that their side is prevailing for now.

With more with the background of the case, and on Microsoft, here's our Steve Young.


STEVE YOUNG, CNN CORRESPONDENT (voice-over): Capping a landmark anti-trust trial, District Court Judge Thomas Penfield Jackson ruled Microsoft is a predatory monopolist -- in his words, "a company that put its oppressive thumbs on the scales of competitive fortune" -- a company whose CEO the judge simply didn't believe, a company so afoul if the law, it has to be split up.

That was a huge Justice Department win, but then the government suffered its first major defeat in the case when the Supreme Court refused the Justice Department's request that it hear Microsoft's appeal directly.

Instead, it kicked it to the Court of Appeals; that court had sided with Microsoft before. In late February, the Court of Appeals, which usually hears a case for just 30 minutes, allotted seven hours for oral arguments, an extraordinary amount of time. WILLIAM KOVACIC, GEORGE WASHINGTON UNIVERSITY: They've never done it for a matter involving key issues of business regulation. They've never even done it for a matter involving pressing questions of civil rights and civil liberties. It's truly astonishing.

YOUNG: The court roughed up the government, but it also put Microsoft on a griddle after its lawyer claimed the company put its Web browser on Windows not to crush Netscape, but to help consumers.

The issue is what the law calls tying. It's generally regarded as the weakest part of the government's case. If that part of the government's victory falls, most experts believe the Appeals Court would say Microsoft needs to be reined in, but a breakup goes too far. When government lawyer John Roberts said Microsoft violated anti-trust law by refusing to let PC companies drop Microsoft Web browser, Judge Raymond Randolph pounced.

JUDGE RAYMOND RANDOLPH: It's almost like you're saying I'd like to buy a clock radio without a clock.

YOUNG: The court didn't seem to swallow Microsoft's argument that it's not a monopoly because it has to compete with the companies that sell software for practically any kind of device, not just PCs. The jurists skewered Judge Jackson for giving interviews about the pending case, including one in which he compared the company to drug dealers.

JUDGE DAVID B. SENTELLE: What's the unbiased reason for a judge to go into his chambers and hold secret conferences with reporters to say bad things about a litigant?

JUDGE DAVID S. TATEL: There are lots of things that we think and feel about advocates and parties during the course of the proceeding. It doesn't mean that we're entitled to say because those feelings developed during the course of a proceeding, we're going to run off our mouth in a pejorative way, because there is an appearance problem.

YOUNG: The expectation? Enough of the government's victory will survive that the Court of Appeals will assign a different judge, to hear more live testimony before deciding what restraints to impose on the software giant.

Steve Young, CNN Financial News, New York.


HARRIS: Let's go now to our financial news reporter Tim O'Brien, who's checking in from Washington.

Tim, can you give us anymore clarification about what's going on here?

TIM O'BRIEN, CNN CORRESPONDENT: I have to tell you, Leon, I haven't seen the opinion. I'm only hearing right now what "The Associated Press" is reporting, that the Court of Appeals has reversed the breakup of Microsoft. That's a mouthful right there. We have to understand what the grounds for the Court of Appeals' decision is, of course. We do know that this was an extraordinary remedy that the Court of Appeals had ordered. The courts have never ordered the breakup of the company before solely on the basis of its simply becoming large and powerful. It's usually because of mergers and acquisitions that we didn't have the Microsoft case.

I did speak with Justice Department officials about this case in the last few days, about what would happen if the government was reversed on this. I don't think that -- and we understand that the Justice Department will be making a statement momentarily -- I don't think we're going to get any guidance as to whether they plan immediately to appeal. The decision is at least nominally that of the solicitor general, Theodore Olson, but he certainly be consulting with others, certainly the Anti-Trust Division; he'll be asking for their opinion, and it certainly will forthcoming.

One of the big issues in any case that the solicitor general decides to take to the Supreme Court, or decides not to take to the Supreme Court, is to what extent the White House should get involved. There are some cases where White House intervention is seen as unseemly and just interference that shouldn't be there. That is certainly the case, for example, where you have a big constitutional question about freedom of religion, or perhaps even abortion rights.

But in this case, the enforcement of anti-trust policy is, very peculiarly, an executive branch decision, and the White House is expected to weigh in very heavily in this decision. But this administration, as you know, Leon, has been characterized as one of the most pro-business administrations since the Hoover and the Harding administration. So we don't know yet, and we probably won't find out for several days, what the White House plans to do, what the solicitor general plans to do. It's going to be a committee decision.

What we're hearing, though, is that the Court of Appeals has reversed Judge Jackson's decision breaking up Microsoft.

HARRIS: Let me ask you about this, Tim -- I know I'm holding you at something of a disadvantage, because I've been able to keep an eye on the computer behind me, but something else has come in, saying it's been ordered by this Appeals Court that a new judge is to make the decision, taking this out of Judge Penfield Jackson's court. Some people had been critical of Judge Jackson's comments that he has made about this case, some interpreting them as appearing that he's had his mind made up about this already. Can you make up of anything of that from what you've heard from being able to talk to people inside?

O'BRIEN: That was widely expected, if there any kind of remand sending this case back to the lower court that Judge Jackson would be out of it. His objectivity has been impugned. There are those who speak in his defense. He did give an interview to Ken Auletta, which formed the basis of Auletta's book about this case. A lot of people said he shouldn't have done that. But there were ground rules here, that he could not publish any of those interviews, any information from those interviews until after the case was decided. Judge Jackson saw that this was an historic case and he wanted to make comments for the record.

He doubted the credibility of Microsoft and many of Microsoft's witnesses, including Bill Gates himself, on videotape. There are those who say that is not improper for a judge to do that. But the Court of Appeals was very, very tough on that issue during the oral argument, many months ago. They criticized Judge Jackson -- almost every judge on the Court of Appeals was critical of the judge. So it's not at all surprising that if it does go back for from any reconsideration -- reconsideration of legal grounds, reconsideration of the factual record -- that Judge Jackson would be taken off of the case.

HARRIS: Tim, we'll let you get back to getting some more tea leaves to read for us this morning. We thank you for the snap reporting. Thanks much, Tim O'Brien, reporting from Washington.

Once again, word we're getting is that Federal Appeals Court has reversed the ruling against Microsoft, saying the company does not have to break up. This decision is going to be decided by another judge in another court. TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT


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