SCN: Microsoft

[Steve]

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====================

Microsoft: Breaking Up Is Good to Do  

by Eben Moglen, professor of law and legal history at Columbia 
University Law School

(The Nation)---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.  

Copyright 2000 The Nation Company, L.P.

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