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Inside Politics

Judge Orders Breakup of Microsoft; DNC Launches Issue Ad

Aired June 7, 2000 - 5:00 p.m. ET


JUDY WOODRUFF, CNN ANCHOR: An antitrust ruling splits up software giant Microsoft. A look at the ruling and the politics surrounding it.

Plus, the software mogul on Capitol Hill, a look at what happens when Mr. Gates goes to Washington.



WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST (voice-over): What happens when the old politics meets the new economy, something has to give, because the old politics may not be relevant to the new economy and that leaves politicians like Al Gore and George W. Bush groping for answers.


WOODRUFF: Our Bill Schneider on the presidential hopefuls and their problems with the Microsoft issue.

ANNOUNCER: From Washington, this is INSIDE POLITICS, with Bernard Shaw and Judy Woodruff.

WOODRUFF: Thank you for joining us. Bernie is off this week.

While a federal judge's decision on the future of Microsoft has been expected for weeks, it still comes as the most significant development yet in the long saga of the government's antitrust case against the software giant. This afternoon, Federal District Judge Thomas Penfield Jackson issued his final ruling.

Our senior Washington correspondent Charles Bierbauer joins us now, he's at U.S. district court with the details -- Charles.

CHARLES BIERBAUER, CNN SENIOR WASHINGTON CORRESPONDENT: Judy, you're right, Judge Jackson said this should not come as a surprise to Microsoft, but that he had reluctantly come to the conclusion, as he put it, that a structural remedy is imperative in part because Microsoft as it is currently constructed and led, pointing perhaps to Bill Gates directly, is unwilling to accept the notion that it broke the law. And so, the judge in a 17-page ruling that boils down to essentially this has said, break Microsoft in half, in two parts, an operating systems company and an applications systems company; operating systems being Windows pretty much as we know it, applications being just about everything else that Microsoft has been doing.

He also says that Microsoft must change its behavior, that there can be no more deals tying different elements together as Microsoft did by incorporating its Web browser Internet Explorer into the Windows system, and that there could be no anti-competitive pricing deals, that Microsoft has to change its behavior. And these will last, of course, in total up to as much as 10 years, all very much depending on the appeals process yet to come.

What's the meaning of all this for consumers? Many people would certainly want to know. That answer came in part from the assistant attorney general, Joe Klein.


JOEL KLEIN, ASST. ATTORNEY GENERAL: Customers, consumers in a free and competitive marketplace will decide for themselves what software they want to purchase. Neither a monopolist nor the government will dictate that choice.


BIERBAUER: Microsoft says it will appeal, Judge Jackson anticipates that the appeal could be directed immediately to the Supreme Court. Microsoft has not yet committed as to whether to do that or go to the intermediate appeals court, that we will know in due time -- Judy.

WOODRUFF: All right, CNN's Charles Bierbauer outside the federal district courthouse here in Washington.

Well, Microsoft chairman and founder Bill Gates didn't waste much time in denouncing the judge's ruling, he said Microsoft will appeal.


BILL GATES, CHAIRMAN & FOUNDER, MICROSOFT: This ruling would provide that the Internet and support in Windows could never be enhanced, it could never be updated to new standards, whether they relate to privacy or any other consumer needs. This ruling says to creators of intellectual property that the government can take away what you've created if it turns out to be too popular.

We will be exercising our right to appeal this decision, and we're confident the judicial system will overturn today's ruling.


WOODRUFF: To see the complete transcript of Judge Jackson's ruling, you can go to CNN's Web page at Well, the man in the thick of the government's case against Microsoft is, of course, Bill Gates himself, and in the weeks leading up to judgment day he played a key role in the defense of the company he founded.


WOODRUFF (voice-over): Whenever Bill Gates comes to Washington, trouble seems to accompany him. In April he attended a White House conference on the new economy. That week Judge Thomas Penfield Jackson ruled that Microsoft broke antitrust law.

Yesterday, Gates was on Capitol Hill for an annual visit with other high-tech CEOs. Today, Judge Jackson ordered Microsoft to break up.

Those two trips were scheduled long in advance, but Gates' higher visibility in 2000 is no accident. In the past, Microsoft has kept a distance from Washington politics, but with his company's future on the line Gates has raised his profile and Microsoft has opened its wallet.

According to the Center for Responsive Politics, Microsoft has contributed $1.1 million in soft money to the political parties this cycle: 529,000 to Democrats; 607,000 to Republicans. Microsoft gave another 700,000 to individual candidates.

Despite the bipartisan giving, Gates may benefit from a change in administration. Back in April Gates told a closed-door meeting of House Republicans that a different administration would probably have treated Microsoft differently than the Clinton-Gore administration, and while Vice President Al Gore says the nation's anti-monopoly laws are critical to fostering competition, George W. Bush has taken a position that's more sympathetic to Microsoft.

GOV. GEORGE W. BUSH (R-TX), PRESIDENTIAL CANDIDATE: You know, the fundamental question is, is Microsoft an innovative entity that is providing jobs or are they disrupting an economy that is changing so rapidly? I think the great fear is that Microsoft will be broken up.

WOODRUFF: Bush won't talk about the case now, at least until it's resolved. But if it is still in the appeals court by the end of the Clinton administration, the next president might well be able to influence its outcome.

BOB LITAN, BROOKINGS INSTITUTION: If the case is in play, then the next administration, if it wanted to, could try to settle with Microsoft on more generous terms than what this administration has pursued.

WOODRUFF: A spokesman for Microsoft says Gates and the company are not looking for a political solution, that it's a legal matter and they will fight it in court.


WOODRUFF: Bill Schneider has been following the Microsoft case and he joins us now.

Bill, does this case raise any new issues for the American people?

SCHNEIDER: Well, Judy, the issues here really do look familiar: It's government versus business, and the public is inclined to believe that Microsoft is a monopoly and that breaking it up into two companies would be good for consumers.

So do people think that the government should break up Microsoft? Surprise! Most people say no. Why not? Well, they're not sure Microsoft has done anything bad. The American public has a very favorable opinion of Microsoft and of Bill Gates. We're a long way from the trust-busting days of Teddy Roosevelt. To a lot of voters, the suit against Microsoft looks like a solution for which there is no known problem.

WOODRUFF: All right, Bill Schneider, thanks very much.

And INSIDE POLITICS returns in a moment with a look at a new soft money ad blitz: Democrats zero in on the issue of prescription drug coverage while Republicans say the vice president broke a promise.


WOODRUFF: Former Wall Street mogul Jon Corzine has won the New Jersey Democratic Senate primary, beating former governor Jim Florio by 58 to 42 percent. Corzine spent about $35 million on his race, the most any Senate candidate has ever spent.

A new phase of the 2000 presidential contest was launched today at a news conference in Washington, where the Democratic National Committee released its first so-called "issue ad" to begin airing in several key states later this week. It is the first part of a multimillion-dollar effort to promote the party's agenda and to boost the candidacy of Al Gore.

CNN's Chris Black takes a look at the Democratic ad and GOP reaction.



NARRATOR: Every week, Bob Darthez has to afford his groceries and his prescription drugs.


CHRIS BLACK, CNN CORRESPONDENT (voice-over): The Democrats first ad calls for Medicare drug coverage for all seniors.


NARRATOR: They're using money and lobbyists to stop progress in Washington. Al Gore is taking them on.


BLACK: Half of the 30-second ad features the Democratic presidential candidate. The Democratic proposal is called "The Gore Plan," and the ad was produced by the same consultants who make Al Gore's campaign commercials.


AL GORE, VICE PRESIDENT OF THE UNITED STATES: People can't afford these ridiculously high prices for prescription medicines. When their doctors prescribe medicine for their health or their well- being, they ought to be able to take it.


BLACK: In case, there was any confusion, party chairman Joe Andrew made the point of the ad clear.

JOE ANDREW, DNC NATIONAL CHAIRMAN: That our presumptive nominee, Vice President Al Gore, is willing to debate George Bush any time, anywhere on this issue.

BLACK: The ad hits the airwaves Thursday in 15 key states, including the battlegrounds of Illinois, Michigan, Ohio, and Pennsylvania. It is the first of a series of ads to highlight the Democratic agenda and draw distinctions with the Republicans.

The law says the national party can promote issues, but not directly advocate the election of their candidate. The Democratic chairman does not dispute this ad is intended to help Al Gore.

ANDREW: Of course this helps Al Gore, and of course, this helps all Democrats.

BLACK: This year, Democrats hope to take back control of the House and pick up seats in the Senate. Democratic leaders say the prescription drug issue is a plus.

SEN. THOMAS DASCHLE (D-SD), MINORITY LEADER: Every Democratic candidate running for the Senate this year will have at least one prescription drug ad.

REP. RICHARD GEPHARDT (D-MO), MINORITY LEADER: This issue is vital to our candidates to try to win back enough seats in the House.

BLACK: Republicans, including presidential candidate George W. Bush, support a more limited benefit. Democrats describe the new ad as a call to arms for the public.

GEPHARDT: We're trying to turn up the heat so our Republican friends see the light.

BLACK (on camera): Republicans are accusing Gore of breaking a promise to not be the first to run issue ads financed by soft money. Democrats say it was not a promise; it was a challenge. They say Bush rejected that challenge and some of his supporters have already aired anti-Gore ads.

Chris Black, CNN, Capitol Hill.


WOODRUFF: Well, one thing you can count on in this new war over words: It won't take Republicans long to come up with a counteroffensive.

CNN's Jonathan Karl reports.


JONATHAN KARL, CNN CORRESPONDENT (voice-over): Republicans will soon launch their own party-financed advertising blitz, but first George W. Bush wants to get as much mileage as possible out of Al Gore's allegedly broken promise not to run such ads first.

GOV. GEORGE W. BUSH (R-TX), PRESIDENTIAL CANDIDATE: To Al Gore breaking the pledge? It doesn't surprise me. He's a man who says one thing and does another. It's consistent with how he has run his campaign. I'm not the least bit surprised.

KARL: At a Washington press conference, two of John McCain's most prominent supporters helped Bush make the case against Gore.

SEN. FRED THOMPSON (R), TENNESSEE: He is a part of an administration that has done everything in the world to keep the American people from finding out what went on in the last election.

REP. LINDSEY GRAHAM (R), SOUTH CAROLINA: He took a bold stand and he used John McCain's name to do it and he played on the sympathies and the emotional dynamic at the time, he was trying to further his political situation and three or four months later he's dropping back to business as usual.

KARL: But McCain promised to swear off ads financed by unregulated soft money, regardless of what the Democrats did. Bush made no such pledge, and his strategists say a Republican soft money ad campaign will soon begin.

THOMPSON: You can take the position that soft money ought to be allowable. That's an intellectually honest position, it's one I disagree with, but this is about credibility.

KARL: In a nationally-coordinated strategy, local Republican officials plan to respond to Gore's ads in every state they run.

ARI FLEISCHER, BUSH CAMPAIGN SR. ADVISER: You can expect to see in all the states, the 15 states in which the ad is airing, Republicans to hold news conferences to make the case that Al Gore gave his word and didn't keep it. Do we really want another eight years of somebody in the White House who will give their word and not keep it? That's a serious issue.

KARL: At upcoming Gore campaign events, Republicans plan to send somebody dressed as Pinocchio. It's a variation of the "Corn Man" tactic used by Gore allies in the lead up to the Iowa caucuses to ridicule Bill Bradley's reluctance to do a debate on agriculture.

(on camera): Republican strategists say they will launch their own advertising campaign in about two days, leaving some time for party officials to first express indignation at the Democrats for running their ads first.

Jonathan Karl, CNN, Austin.


WOODRUFF: And joining us now, Margaret Carlson of "Time" magazine and Tucker Carlson of "The Weekly Standard."

Tucker who comes ahead -- out ahead in this back and forth over who said what about running ads and soft money and the rest of it?

TUCKER CARLSON, "THE WEEKLY STANDARD": Well, I think Bush wins this round. I mean, it's clear that Gore went back on his word, he said he wouldn't accept -- he wouldn't allow the DNC to run these ads until the Republicans did so first; they haven't. But I -- I mean, hopefully everyone will just become so embarrassed about this ludicrous argument that they will stop.

I mean, the ads the DNC is putting out are klunky and heavy handed, this is what parties do, they put out klunky, heavy handed ads in support of their candidates. The First Amendment guarantees them the right to do it, I hope they keep doing it. Amen for soft money, actually.

MARGARET CARLSON, "TIME" MAGAZINE: I'm surprised he didn't say the American people win, because Tucker loves...

T. CARLSON: They do, they do win, of course they win.

M. CARLSON: ... soft money.

You know, in fact, Gore -- Bush ran the hypocrisy ads, which were, you know, fairly effective using the "Jeopardy" game to show that Gore is a hypocrite, which is the same thing as these ads they're running. They're independent expenditure ads, which Gore talked about in the so-called challenge.

So, you know, Bush did go first in that way. You know, the American people, in fact -- Tucker is right about one thing -- they don't care about this, they don't really make the distinction between the hard and soft money the way maybe -- they just think there's too much money overall.

WOODRUFF: But when George W. Bush stands there and says, a man who says one thing and does another, doesn't surprise me. Is that the kind of argument that's going to have some traction with voters? T. CARLSON: Well, I don't know, I think the Pinocchio at events -- I sort of like that, and I think the more people in costume you can have events, the better.

M. CARLSON: I love costumes. The chicken costume, the butt man...

T. CARLSON: Totally.

M. CARLSON: ... the corn -- those are good, old fashioned political techniques.

T. CARLSON: But clearly, this is not the sort of talking point that Gore wants to deal with, that he's not a man of his word, and this is the point that the Republicans and the Bush campaign have been hitting on again and again. If it sticks, it's bad.

WOODRUFF: Let's talk about the Microsoft ruling, political implications, Margaret?

M. CARLSON: Well, people say that Microsoft is waiting for a better political environment. George Bush hasn't tipped his hand. I'd be surprised if the first thing George Bush did when he came in would be to take an executive decision out of the Justice Department to sue Microsoft, then a Republican judge rules against Microsoft and he steps in to reverse that. This is not likely even if George Bush were to win, so as a strategy that's not a good strategy on Microsoft's part.

T. CARLSON: Though, I don't know. I mean, if there's an economic downturn of any kind over the next five or six months, it's pretty easy, I think, for the Bush campaign to say, well, gee, look at what, you know, the Microsoft ruling has done to the economy, that is -- probably won't be a fair critique, but I think it could be an effective one rhetorically.

M. CARLSON: Well, that was tried in that when the market dropped a few weeks ago the Nasdaq went down. You know, there's -- it coincided with one of the Microsoft rulings, but almost no one said after Gates tried to make the point that, that was a result of the Microsoft ruling. It was that those types of stocks are so inflated and interest rates had gone up and the market had gone down.

WOODRUFF: Well, what about the polling that Bill Schneider told us about a little earlier in the show, while people think, hey, maybe it is good for consumers to have two Microsofts or whatever the other one is going to be called, but they don't want the government doing it?

T. CARLSON: Well, it's a great question. I mean, AT&T was broken even up -- what -- almost 20 years ago, I got my phone bill this morning, I still can't understand it. So, I mean, it's not clear how exactly consumers are being hurt by Microsoft, and I think it's even less clear how they're going to be helped by breaking it up.

M. CARLSON: You would have a princess phone still if AT&T weren't broken up.

T. CARLSON: Well, that's true.

M. CARLSON: And if the government doesn't do it, you know, the question in the poll, who is going to do it? It's not as if Microsoft is going to do it willingly.

T. CARLSON: Well, how about the question, does it need to be done?

M. CARLSON: Yes, I think it does need to be done.

We don't even know the mousetrap that isn't out there, the better mousetrap, because Microsoft didn't allow -- used its monopolistic power to have it not created.

T. CARLSON: It would be a whole different world, we'd probably all be levitating around, really, if Microsoft hadn't been there to sort of quash these brilliant innovations that would have sprung up like flowers.

M. CARLSON: Yes, our stories would write themselves.

T. CARLSON: It would be unbelievable.

M. CARLSON: You know, we'd press a button and...

T. CARLSON: What might have been, Margaret.


WOODRUFF: All right, before we get too poetic, Tucker Carlson, Margaret Carlson, thank you.

That's it for INSIDE POLITICS. "WORLDVIEW" is next.



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