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Sunday Morning News

Negative Antitrust Ruling Looming Over Microsoft After Negotiations With Justice Department Falter

Aired April 2, 2000 - 8:04 a.m. ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

CAROL LIN, CNN ANCHOR: Let's get more on why the government believes Microsoft violated antitrust law. George Cary is the former deputy director of the Federal Trade Commission and an expert on antitrust law, and Mr. Cary joins us from our Washington bureau. Good morning.

GEORGE CARY, FMR. DEPUTY DIR., FTC: Good morning.

LIN: Well, it looks like given the judge's harsh findings of fact in this case and now a potential verdict it's going to be a tough set of penalties. What's your prediction?

CARY: Well, I think it will be very interesting to watch exactly how far the judge takes this. The government has proposed on several occasions that Microsoft be broken up, or at least has considered that. A speculation is that they have raised that with Microsoft in the settlement talks.

They have looked at the question of separating the applications programs, things like Word and other application programs from the operating system. They have talked about potentially breaking Microsoft into component parts, and they have talked about making the underlying source code available to competitors so that Microsoft would not be in a position of discriminating against them.

It will be very interesting to see what the government proposes and exactly how far Judge Jackson is willing to take it in light of his findings.

LIN: Why is that you think the judge in this case didn't think that Microsoft's offer in giving up these source codes was going to be enough? And, first, why don't you explain what the source code is?

CARY: Yes, the source code is basically the little bits, the ones and the zeros that make up a software program at the very lowest level. It is the architecture of the software and by looking at the source code, you're in a position to understand exactly how the software works. Now...

LIN: And in Microsoft's case, was it that they installed this source code which prevented a user like me from accessing other programs? CARY: No, the problem has been, or at least it's been alleged, that Microsoft has used or kept the source code secret and has revealed only parts of the source code to other software companies who are writing software applications that run on the Microsoft operating system.

The operating system is the core of the machine that basically tells the machine what to do. In order to actually do something useful, such as a word processor or a spreadsheet, you need an application program that runs on the operating system. And it is the connection between the operating system and those other applications that has been the source of this problem.

People have alleged that Microsoft has altered the source code to advantage their own programs and to disadvantage the programs of other software makers.

LIN: So, Microsoft's position in this case was that by giving up the source code they were essentially breaking up or at least allowing more competition. Why do you think that the judge was suspicious about this offer?

CARY: Well, let's go back to what has been going on here. Judge Posner has been brought in as a mediator, basically, not as a judge per se. So his role is to mediate between the government and the company and to try to convince both sides what the strengths and weaknesses of their case is and to get them to a common resolution. So this was part of a settlement process.

Judge Posner apparently has been unsuccessful in getting Microsoft to give more or getting the government to demand less. He's been acting as a negotiator or a arbitrator trying to get them to come to a resolution between them. It appears as though the government's demands are more than Microsoft is willing to give. It appears as though Microsoft is more prepared to go the route of appealing this than they are to give up what the government is demanding at this point and Judge Posner couldn't convince either side to give anything more.

LIN: All right, and it appears it's going to be a long time before we see a final resolution. Microsoft has said that it intends on taking this all the way to the Supreme Court.

CARY: Right.

LIN: Thank you very much, George Cary, for joining us this morning.

CARY: My pleasure.

LIN: For more on the Microsoft story, please go to our Web site at cnn.com.

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