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Court of Appeals Vacates Antitrust Ruling Against Microsoft

Aired June 28, 2001 - 12:01   ET


LEON HARRIS, CNN ANCHOR: We've got lots of news -- breaking, developing new this morning. A U.S. court of appeals has handed down a decision in the Microsoft antitrust case.

DARYN KAGAN, CNN ANCHOR: And that is where we're going to start, with Tim O'Brien, who can tell us more about this decision that basically, Tim, reverses the previous order to tell Microsoft to split into three separate companies.

TIM O'BRIEN, CNN CORRESPONDENT: You used the word "reverse." That's a legal term, and actually, that's not what the court did, and there's a critical distinction. What it did was it vacated Judge Jackson's decision. It did not pass judgment on his conclusions of law or his conclusions of fact or his conclusions of law (sic).

It's very important because now means it means it goes -- it threw out the case because it found the decision -- Judge Jackson's decision was tainted because of the appearance of bias. There are the critical things he'd said about Microsoft, about Bill Gates during the trial to reporters and to others.

That's good news and it's bad news for Microsoft. It's good news in the sense that if the Justice Department now were to appeal, it's the kind of ruling the Supreme Court may be less likely to take up than a ruling on the merits. The bad news is it really isn't a final victory for Microsoft by any stretch, because it means if this stands it goes back to a trial court, a different judge for reconsideration -- back to square one, and it could be -- another decision still could be years away.

But it's very important to recognize that the court of appeals did not pass on the merits of what Judge Jackson had said -- his conclusions of law, the findings of fact -- only that the decision appeared to be tainted, there was an appearance of bias. The court said, we don't know if there actually is bias, but the appearance is enough to set this ruling aside -- Daryn.

KAGAN: Tim, a couple of questions for you. Why, first of all, would the Supreme Court be more likely to take the case on this situation rather than if it was based on merits?

O'BRIEN: Well, the merits would certain will be a final decision. Here you have something -- the Supreme Court -- justices of the Supreme Court themselves don't give interviews. They, too, may be a little distressed with Judge Jackson's handling of this case, his availability to the news media.

They don't have to make any decision on the merits. If they take it up on the judge's conduct it's sort of a side show away from real issues of the Microsoft case. They still might take it, but they'd be much more likely to take it if it was a ruling on the merits.

KAGAN: And let's say this goes -- one of the possibilities that you brought up -- that this could go on for years and years -- what happens in the meantime? Is Microsoft allowed to function as a single company?

O'BRIEN: It certainly would be. But the fact that the decision is vacated, again, it doesn't mean the lower court was right or wrong. It's almost as if the decision never happened. They throw it out, they pass no judgment on it, it's back to square one.

KAGAN: And then the government would have to decide whether it's worth pursuing, given how things played out this time?

O'BRIEN: Well, it's a different administration.

KAGAN: That's true.

O'BRIEN: The facts are the same and the law is the same. But this administration might view the facts and the law a lot differently than the last one.

KAGAN: Still a lot of questions yet to be answered on this one. The story is not over. Tim O'Brien.

O'BRIEN: Mostly from the Justice Department, right.

KAGAN: OK, we will look for that. Tim O'Brien, thank you.

HARRIS: Speaking of views, let's check and see what the public -- how the public views Microsoft and the way it's conducted itself and conducted business.

Let's go down to our Frank Newport, who's standing by at the Gallup Poll headquarters in New Jersey.

Frank, what have you got there?

FRANK NEWPORT, EDITOR IN CHIEF, GALLUP POLL: Well, Leon, we've asked about Microsoft and this kind of decision for two or three years now. And generally speaking the public probably says, no breakup of Microsoft, we like the company.

We just finished, as a matter of fact, a poll that's very important with Internet users. A random sample of people who are most likely to be affected by Microsoft, and generally they mirror what we've been finding over the years to the American public.

Look at this: the poll we just completed, 79 percent of Internet users, favorable opinion of the company. Those are the intensive users. It matches up with our latest general public poll that we did a while ago -- 65 percent.

Now that doesn't mean the public doesn't say Microsoft is a monopoly. We've asked that question, we find people roughly breaking even. These are these intensive Internet users here -- same thing for the general public.

But what the public is telling us is they don't think that's bad. Look at this: from intensive Internet users, is Microsoft's dominance of its markets -- the issue at issue here, of course -- the economy, consumers the computer industry, each of these the people that we interviewed tell us they think that the dominance has been good rather than bad for these elements of the industry and society.

Finally, the bottom-line question: Should Microsoft be broken up? That's what the decision that was vacated today obviously would have done. Internet users, 35 percent only say yes, and that's almost exactly the same figure we get from all Americans when we ask them the same question.

So Leon and Daryn, the bottom line is the public's, based on our data, quite happy not to see Microsoft broken up. Back to you.

HARRIS: Well, it looks like they'll get their wish, at least for some time to come. Thanks, Frank, we'll check back with you some other time.

KAGAN: The next step in the legal process for this could be the Supreme Court; and that's where we find our Charles Bierbauer -- Charles.

Charles, can you hear us?

CHARLES BIERBAUER, CNN SENIOR WASHINGTON CORRESPONDENT: Yes, I hear you now. It's kind of noisy up here; a lot of tourist buses going by, and they're fighting you. So go ahead, ask me that question again, would you?

KAGAN: We're just saying that the next step along the legal process for this Microsoft case could be the Supreme Court, but the decision would have to be made, of course, whether or not the high court would hear this.

BIERBAUER: Well, no, actually I think the next step is in the opposite direction because what has happened today is that the appeals court has decided to send this back to pull Judge Jackson out of the mix and get another judge to look at it.

You have to remember -- I'm sorry?

KAGAN: Go ahead, I think someone mistakenly was talking in your ear, Charles, go ahead with the brilliant though that I know you were imparting on.

BIERBAUER: I'm sorry, we've got a lot of competition here today.

Remember that this case came up to the U.S. Supreme Court once before, after Judge Jackson's ruling, and that's because antitrust cases can be moved on direct appeal. And what the court here then said was, in essence, that they wanted to have the appeal's court take another look at it, get a broader sense of what the case was about.

So this court, the U.S. Supreme Court passed on its first opportunity, with the appeals court now asking another judge to take a look at it, pulling Judge Jackson out of it.

As I understand it, this case will go down rather than up to the U.S. Supreme Court. And, perhaps even more importantly, will depend on what the Department of Justice decides to do -- whether they want to pursue this or, perhaps, even settle this matter, and it may never get to the Supreme Court -- Daryn.

KAGAN: All right, Charles Bierbauer at the Supreme Court, thank you.

Let's also bring in our legal analyst Roger Cossack.

Roger, still a lot of questions about what will happen to Microsoft, but this does appear to be a judgment day on Judge Jackson, and the appeals court none to happy with his behavior in this situation.

ROGER COSSACK, CNN LEGAL ANALYST: Daryn, this is a highly unusual decision. What the court has said, basically is, you know what? This judge that heard this case did not act in a judicial way, did not act the way we want our judges to act. It was almost as if he had a personal vendetta, at times, against Microsoft. We believe the whole judgment that he came to is tainted; we're sending it back down.

By the way, it was a unanimous seven-zip vote for this holding -- we're sending it back down.

Now, it is unclear whether they're sending it back down to have the whole process heard over again or to just have another judge review it and then make the decision as to what to do to Microsoft.

But let me just get to the bottom line: This is a huge win for Microsoft today.

KAGAN: You said it's still unclear as to which one it's going to be; what would clear that up?

COSSACK: Well, it's going -- probably we will find out more as the decision is -- we have an opportunity to review the decision. But we know for a fact that what has happened so far is that this holding, this ruling by Judge Thomas Penfield Jackson, which said that Microsoft was an illegal monopoly and they had acted in an illegal way has been vacated. "Vacated" means it's not there anymore.

It has now been sent back down to district court of appeal, saying no matter what happens Judge Penfield Jackson is clearly off this case; we are going to have another case -- another judge review it. Now, what I'm unclear about is whether or not it's to review, to see whether or not the decision will hold, or review it in terms of what the penalty may be. But I believe this: that things have changed in this -- with the administration. I believe that they're not -- the Justice Department may not be as aggressive against Microsoft today as they once were under the Clinton administration.

And, with the vacating of this ruling, look, you just have to call it the way it is: This is a big hit for Microsoft. This is a win.

KAGAN: Yes, if we look at this carefully though, Roger, the court of appeals was not happy with Judge Jackson's decision to break up Microsoft, but it didn't touch the idea that Microsoft had broken antitrust laws.

COSSACK: Well, what they have said is this: The judge who made the decision in this case -- and remember, it was one judge, Thomas Penfield Jackson -- who made the decision, who decided what the facts are, who decided what the truth is, who decided who to believe and who not to believe was a tainted individual by the way he conducted himself during this trial. Therefore, we cannot rely on this decision.

Now, what the actual remedy is, I can't exactly tell you. There is a suggestion that the remedy -- two things. That, in fact, perhaps we may have a whole new trial. Or, in fact, perhaps a judge may look at this and decide -- a new judge -- and decide that -- what a new punishment should be. But whatever it is, this is now going back to district court. This is going to take a great deal of time to review...

KAGAN: Time and money, and a new administration.

COSSACK: Exactly right. You've got to call it the way it is on this one.

KAGAN: That's how it is. Roger Cossack in Washington, thank you -- Leon.

HARRIS: Well, let's go to New York and check and see if there's any reaction there on the markets. Sasha Salama checking in from the Nasdaq.

Sasha, what are you seeing and hearing there?


What we saw just about 30 minutes ago was the share of Microsoft, the stock halted. As you can see, halted after it had seen already a nice rally. Lots of orders coming in. Microsoft halted at $72.50 a share.

Microsoft is the No. 1 maker of software in the world. It is one of the biggest companies that trades here on the Nasdaq. And because this is known as a market-weighted index, the big companies actually have quite a bit of influence in the overall direction of trading. So we'll be looking to see when this stock's halt is taken off.

We do expect that the stock will get a nice bounce even up from where it is, and that will be welcome news to many investors who own Microsoft, whether as an individual stock or part of a mutual fund. It's one of the most widely-held stocks in America, and it's part of many mutual funds, particularly growth mutual funds.

What you can see from the 52-week chart on Microsoft: here we are now. The stock at it's low over the last 52 weeks was at $40.25 a share. So now it's $72 and change -- it's nearly doubled from that low. This is being called a big victory for the software giant. We'll see if Wall Street thinks so, but the betting is it probably will give a big thumb's up, and shares will be really rallying nicely once the stock is reopened for trading -- Leon.

HARRIS: All right, look, thanks, Sasha. We'll check back with you later on.

Let's go over now to the New York Stock Exchange, where Jennifer Westhoven has been watching things, and check and see if she's been hearing or seeing anything significant in the last few minutes or so since this news has broken out.

What have you heard, Jen?


Well, the Dow has really been able to go up and retest and make new session highs after this came out. Of course this is seen as a major victory for Microsoft. You can expect to see a big jump in that stock.

But here's something else: You know, there are portfolio managers out there saying that, essentially, this is a sign that the antitrust course taken by the Clinton administration is over. It is not going to be like that in the future, and it means that big government will stay out of the way of the technology arena for a little while, or at least in some of these big cases. And that is seen as a real bullish catalyst for some of these stocks that are in the kind of industries that perhaps the government had been looking at.

So you can see why that would help out Microsoft, but also be something that can help out the entire technology area in general.

So we already had a rally underway before the Microsoft news came out. That really was coming kind of belatedly after the Fed's 1/4- percentage point cut yesterday in interest rates. It's taken a while, but people, after they sort of sifted through the statements and looked at it again, it seems to be the thinking on the trading floor here is that maybe the Central Bank, the Federal Reserve thinks that the worst is over for the economy, that they want to wait and see those cuts make their way in.

But the thinking then, you know, from economists and analysts is that they will be making their way; that there is more optimism for the economy now. Right now we've got the Dow Jones Industrial Average up 176 points, almost, earlier. It was up a little bit more than 200. Another area to keep your eye on today, shares of Honeywell International are jumping. There's talk out there that perhaps the deal with GE will get done. GE is making new concessions to European regulators in effort to win approval for that merger. Other industrial stocks doing pretty well. You see 3M, United Technologies and American Express all trading a little bit higher. We're also seeing semiconductor stocks, biotechnology stocks doing better.

You can see that the market's really willing to take on a little bit more risk at this point, if the thinking is that the economy will bounce back and, of course, you can expect to see a pretty big rally in Microsoft later -- Leon.

HARRIS: Yes, I think that's a safe bet, Jen. That's a pretty safe bet. Way to go out there on a limb. Our Jennifer Westhoven checking in from the New York Stock Exchange.

KAGAN: Thanks a lot.



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