A federal court has ruled that Microsoft is a predatory monopolist and, stunningly, that the company should be broken into two parts. But the Microsoft opinion is the handiwork of one federal district court judge. Appeals lie ahead, and at the end of the road is the Supreme Court. The current Supreme Court majority has been reluctant to interfere with business conduct other than price-fixing. If George W. Bush should win the presidential election and appoint one or two Supreme Court Justices, we can expect yet more erosion of the antitrust landscape.
The Supreme Court once championed antitrust laws as valued tools to limit corporate power and to promote the autonomy, diversity and economic rights of people and firms without power. But the message of contemporary opinions is quite the contrary: Trust business, not government. It is fair to worry whether the Rehnquist Court has handed big business the license to do as it will, and if not yet, whether appointments by George W. Bush would complete the handover.
In one notable case, Liggett & Myers challenged the tobacco oligopoly by introducing low-priced generic cigarettes. In response, Brown & Williamson introduced a fighting brand, which it sold below cost to selected distributors for eighteen months for the sole purpose and with the effect of blunting Liggett's competitive challenge. Liggett sued for discriminatory and predatory pricing. A split Supreme Court threw Liggett's suit out. The strategy may have been unfair to Liggett, the Court said, but the antitrust laws have nothing to do with fairness, and price wars are good for consumers.
In the Microsoft case, District Judge Thomas Penfield Jackson declared Microsoft a predatory monopolist whose conduct has forestalled innovation and "trammeled the competitive process." Microsoft appealed from Jackson's judgment and confidently predicts a reversal. That confidence is not without some basis. The case will be heard either directly by the Supreme Court or, at the Supreme Court's choosing, by the Court of Appeals for the Washington, DC, Circuit, which two years ago overturned Judge Jackson's ruling that Microsoft's bundling of its web browser with its operating system probably violated a 1995 consent decree. Judge Jackson's final opinion in the current case documents Microsoft's predations in copious detail: its unremitting course of conduct and use of leverage to eliminate innovation that threatened to destroy Microsoft's operating-system monopoly.
When the Supreme Court hears the case, it is likely to find difficult questions of law: What standard applies to high-tech, fast-moving markets where a competitor's innovation can (in theory) wipe out a monopolist's power with sleight of hand? Indeed, can we even conceive of Microsoft as a monopolist when it faces the constant threat of technological obsolescence? Should courts or inventors/sellers decide whether browsers and operating systems are two products (and subject to the law against tying) or one integrated product and entitled to the deference of the judge? Should antitrust recede in the face of globalization and the unpredictable forces of technology? But note how even the formulation of the question is likely to inform the overall outcome. Is the real question whether Microsoft violated the law by strategies designed (and certain) to block rivals rather than serve computer users? Is the real, overarching problem: Whom should we trust–Microsoft or courts? Microsoft or antitrust law?
To complicate matters, politics has reared its head. The battle has spilled over to the Congressional arena and the race for the presidency. The country that prides itself on the rule of law could fall prey to the rule of money and the race for hegemony in the global economy. George W. Bush has already announced that he is not too fond of the antitrust laws, apart from the law against price-fixing. Microsoft has made huge contributions to both major campaigns, and it promises more to come. And Microsoft has, unsuccessfully, lobbied Congress to cut off the budget of the antitrust division of the Justice Department if it insists upon continuing its litigation against Microsoft.
But most significant is a President's power to appoint Justices to the Supreme Court. On the Court today there are Justices committed to upholding antitrust and Justices committed to chipping away its foundations. Justices John Paul Stevens and Antonin Scalia stand at opposite ends of the spectrum. Justice Stevens has an abiding concern about uncontrolled private power and is determined not to allow further erosion of the laws meant to control it. Justice Scalia has an abiding hostility to economic regulation and a resolve to minimize antitrust to protect "rational" private actors from "the sledgehammer of §2 [the monopoly law]." Scalia fears the power of government and never sees the power of business. Justice Stephen Breyer, a world expert in antitrust and economic regulation who has never been accused of antitrust populism, is the natural future voice for antitrust on the Court, but even Justice Breyer has been relegated to being a voice of dissent. On appeal from a Federal Trade Commission ban on California dentists' rules against discount advertising, Justice Breyer urged his colleagues to respect FTC findings and not to impose new burdens on antitrust plaintiffs, but he failed.
The Court is in delicate balance in matters of business power versus consumers. One or two Supreme Court appointments can make the difference.