Microsoft: Breaking Up Is Good to Do

Microsoft: Breaking Up Is Good to Do

The pace of recent events made one of the most significant rulings in the history of American antitrust law seem like an anti-climax.

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The pace of recent events made one of the most significant rulings in the history of American antitrust law seem like an anti-climax. The headline news that Microsoft will cease to exist as we have known it, if the government has its way, was thoroughly anticipated in the weeks of final maneuvering.

But on closer inspection there was enough drama and substance to satisfy any observer. Judge Thomas Penfield Jackson’s decision to speed the case in its final stages will certainly be controversial on appeal, as Microsoft will argue that it was deprived of its opportunity to submit more evidence and cross-examine extensively the Justice Department’s consultants who advised on the breakup plan. The tone of Jackson’s final opinion, which flatly stated that Microsoft “has proved untrustworthy in the past,” reminded readers of the terrible cost in credibility that Microsoft has paid as a result of its intransigence in this and prior proceedings before the judge.

Microsoft’s existence now hangs on two weak threads: that it can convince appellate judges that the remedy ordered is unjustified by the facts proved, or that the facts Jackson regards as “proved” are so clearly wrong as to warrant an exceptional decision reversing the trial court on this ground.

The first is much the more promising wager. Jackson concluded that “it is time to put…to the test” by immediate appeal the belief that Microsoft is innocent of any wrongdoing, a belief shared by Microsoft and, as Jackson stingingly put it, “a substantial body of public opinion, some of it rational.” Jackson’s confidence in the strength of his factual findings is justified: The government proved a pattern of business conduct amounting to an illegal attempt to maintain monopoly power, and did so through a compelling range of evidence, including Bill Gates’s aggressive e-mail and his discrediting videotaped testimony denying knowledge of the very e-mail he had written. Microsoft’s defense was inept where it was not self-destructive. Whether, on the other hand, Jackson’s complete acceptance of the government’s strong remedy was justified either by the facts proved or by the preference for a faster road to appellate review will be more difficult to demonstrate to skeptical judges on the Court of Appeals or the Supreme Court.

It is appropriate to be skeptical too about the remedy itself. If fully implemented, it results in two companies, one of which will, like the original Microsoft, possess an apparent monopoly in the market for PC operating systems. The theory is that this monopoly will be successfully undermined by the activities of Microsoft Two, which may choose to distribute, for example, Word and Excel for use with other competing operating systems. This approach to restoring competition is purely speculative. As Jackson himself said in the opinion accompanying his final judgment concerning the intended testimony of proposed Microsoft witnesses, “For the most part they are merely the predictions of purportedly knowledgeable people as to effects which may or may not ensue if the proposed final judgment is entered.” The same is true with respect to the theories of the consultants who helped the government shape its own proposals.

But the more important question, now that this trial is over, is what it told us about the political relevance of antitrust law in the Internet Era. Shorn of the legal technicalities, Microsoft’s defense against the government rested on three claims. Each of these assertions involved a fundamental attack on the role of antitrust in the protection of democratic equality.

First, Microsoft claimed that it was being punished for the successful exploitation of its own new ideas. As Gates claimed after the judgment was announced, “This ruling says to creators of intellectual property that the government can take away what you created if it turns out to be too popular.” Of course, this statement disregarded the factual finding that the property in question had been used illegally to injure others. But it appealed to the antagonism between the “owners” of ideas and those who believe that the new world of the Internet should lessen, rather than increase, the political power of “intellectual property.”

Second, Microsoft claimed, the fast-changing nature of the software industry rendered the slow processes of the law completely irrelevant: Before judgment could be reached, it said, events occurring on “Internet time” would render the decision obsolete. This amounted to an assertion of antitrust immunity for technology firms, and is no more sensible than asserting that judges were incapable of applying the Sherman Act to the rapidly changing industrial economy at the end of the nineteenth century, or the equally dizzying pace of economic change after the Second World War. However illogical it was in historical terms, this claim appealed to a widespread belief in the inherent inefficiency of government, irresponsibly propounded by a generation of Reaganite politicians in both parties.

Third, Microsoft argued that application of antitrust law would endanger the competitiveness of the United States in the global economy. Microsoft was no longer, like the bankrupt aerospace and automotive giants of the eighties, “too big to fail”; it was instead too big to punish or control. This was the most dangerous argument of all, for it was precisely this sort of bigness, towering beyond the reach of democratic government, against which antitrust law was aimed in the first place.

In the end, therefore, United States v. Microsoft did much more than bring to book a company whose illegal activities briefly made its founder the richest man in the world. Far more important, the rejection of Microsoft’s defenses reasserted the importance of antitrust in preserving American democracy from the control of owners and the curse of bigness. “If there are men in this country big enough to own the government of the United States, they are going to own it,” said Woodrow Wilson as a presidential candidate in 1912. In the coming months the current presidential candidates–eager to trumpet their respectful familiarity with the Internet entrepreneurs and even more avid to accept their “campaign contributions”–should be called upon to explain their own views of the Microsoft case and the limits of private economic power in a democratic society. Bad as things may look just now, during the last and perhaps most corrupt campaign of the twentieth century, Judge Jackson has reminded us that there are reasons for hope.

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