Economist changes his opinion on breakup Weakens Microsoft filing Tuesday, May 23, 2000 By DAN RICHMAN SEATTLE POST-INTELLIGENCER REPORTER A Stanford economist who once opposed dividing Microsoft now says he would support it, weakening a court document Microsoft filed yesterday that tries to use the government's own breakup arguments against itself. In a brief filed unexpectedly in federal court yesterday, Microsoft wrote that the Justice Department argued against a breakup in a previous case. It quoted a 1995 Justice Department filing that reads in part, "such remedies would not necessarily benefit competition and would . . . act against the public interest." The government's economist, Kenneth Arrow of Stanford University, in 1995 likewise rejected a bid to break up Microsoft, the company wrote in yesterday's brief. "Professor Arrow saw no need for, and substantial risk of economic harm in, breaking up Microsoft . . .," the brief says. But Arrow, reached yesterday, said he would support a Microsoft breakup today. "The circumstances are quite different. The case then rested on pricing, and my affidavit was appropriate to those circumstances," he said. "At the present moment, I agree a breakup is a very reasonable request, nor do I know of a better one," he said. Microsoft spokesman Jim Cullinan refuted that assertion, saying the circumstances then and now are very similar. The 1995 case ended in a settlement and consent decree, which the Justice Department later accused Microsoft of violating. That action eventually led to the Justice Department and 19 states filing the current antitrust suit against the company in May 1998. Microsoft's brief, filed in the Washington, D.C., courtroom of U.S. District Court Judge Thomas Penfield Jackson, is the company's last chance to influence the court in writing before a hearing tomorrow sets a timetable for choosing a remedy in the 2-year-old case. Microsoft has requested up to six additional months to gather evidence and expert testimony to respond to the governments' remedy proposal. The Justice Department issued no immediate response to the brief. Connecticut Attorney General Richard Blumenthal, one of the state attorneys general leading the states' case, said, "This record speaks very compellingly for the remedy we proposed, and truly no case has been exactly like this." Perhaps not, said Bill Kovacic, an antitrust expert at George Washington University in Washington, D.C. But the brief puts the agency in an awkward position, he said. "Justice may try to get around this by saying that circumstances have changed since then, that Microsoft is now more seriously anti-competitive than it was, but I don't think that's quite enough," he said. "It's now in the awkward position of having to say, 'We were wrong. We were badly wrong.'" Full article at http://www.seattle-pi.com/business/msft234.shtml
