With Microsoft, the Antitrust Game Is Changed
Apparently, Microsoft has not finally popped the painful pimple of antitrust litigation. The very same Justice Department that held Microsoft’s hand (after slapping its wrist) and whispered “We do” in front of U.S. District Judge Stanley Sporkin now wants to block Microsoft’s proposed $2-billion acquisition of Intuit as “anti-competitive.”
No doubt Assistant Atty. Gen. Anne K. Bingaman’s aspiring trustbusters are doing their level best to enforce antitrust law even if the appearance of consistency in its application eludes them. Judge Sporkin has already made it painfully clear just how poorly he believes the government has done in negotiating a consent decree in the public interest.
Further complicating this antitrust mistrust are briefs from unnamed Microsoft competitors that, according to their lawyer, must seek the shelter of anonymity to protect them from the wrath of Gatesian retribution. Consider it antitrust’s version of the Witness Protection Program: Perhaps after testifying, companies will be given a new identity and relocated beyond the reach of Redmond, Wash. The legal gamesmanship here has become so bizarre that all that’s missing is a cameo appearance by Kato Kaelin.
What’s happened, though, is that all this gamesmanship has changed the game. “What about Microsoft?” is now a question that’s rapidly shifting from the technicalities of antitrust law to the realms of public policy. Microsoft’s perceived power and influence has grown so fast that it is no longer seen as just another software company.
Microsoft literally sets the standards in its key market segments. Even its admirers unhesitatingly compare Microsoft to such all-American monopolies as Standard Oil and AT&T; in their heydays. And nobody loves Goliath--especially when Goliath has been known to occasionally sucker-punch the unwary rival.
The idea that Microsoft’s problems are anything more than antitrust aberrations makes Microsoft executive vice president Steven Ballmer seethe: “As an issue of public policy, a couple of whiny competitors shouldn’t be driving the agenda. . . . Those competitors aren’t effective, they’re not innovating and they’ve not done their jobs. Public policy is a poor substitute for real competition.”
But the central issue underpinning antitrust law, of course, is the role of public policy in assuring full and fair competition. Turn Ballmer’s declaration around: To what extent are Microsoft’s competitors ineffective, uninnovative and unable to do their jobs by virtue of illegal, unfair and-or predatory behavior by Microsoft itself? That’s exactly why society has to ask what remedies make sense if, indeed, Microsoft is now of a size, scale and scope that undermines competition and innovation in the software marketplace.
In all likelihood, traditional antitrust remedies are to Microsoft what medicinal leeches are to curing ulcers: inappropriately anachronistic. In a knowledge-intensive industry like software, approaches that go beyond antitrust’s standard restructurings, breakups and acquisition blocking merit more consideration.
If Microsoft really is, for example, leveraging its dominance in the Windows operating systems to procure competitive advantage in software applications such as word processors, databases and spreadsheets, maybe splitting the company up is emphatically not the way to go.
Precisely because Microsoft sets the de facto standards on the desktop, it makes sense to treat Microsoft as much as a standards setter than as a software company. Microsoft needs to be forcefully encouraged to open up the internal processes by which it makes modifications and changes in its operating systems, which can affect other software developers.
“We spend over $65 million a year explaining our operating systems to people,” insists Microsoft’s Ballmer. “We provide more documentation than any other operating systems company. One of the most specious things being discussed is whether Windows is an open system. It is open, but it’s not open by law, it’s open because of good business reasons.”
Indeed, Bob Kruger, Microsoft’s director of strategic relations and standards, points out that the name of Microsoft’s Windows development process is the “Open Process” and that the company works very hard to bring in as many outside developers as it can to both solicit ideas and alert them to technical changes.
Microsoft competitors like Sun Microsystems, however, complain that Microsoft is not as open as it claims. Sun Chief Technical Officer Eric Schmidt argues that Microsoft should standardize how it develops what are called APIs, or applications programming interfaces--the software that links an application to the Windows operating system to get it to work.
Think of the APIs as punching in a telephone number to get into the operating system. Schmidt--and other software developers--allege that Microsoft keeps some of these numbers “unlisted” and changes them in ways that make developing for Windows more time-consuming and expensive. They want to see an outside association manage the standards-setting process for Windows APIs. “That would be the act of a graceful leader,” says Schmidt. Kruger responds that most companies are happy with the way Microsoft manages Windows APIs.
In truth, the API example bespeaks the larger public-policy issue that Microsoft, the software industry and society faces: Just how open--just how technically transparent--should Microsoft’s development processes be to encourage the sort of competition that leads to lower costs and greater innovation?
Will the software industry become more competitive--and will software consumers reap greater benefits--if Microsoft becomes a more open company? And do we let Microsoft alone determine the appropriate degree of openness?
These are now as much questions of public policy as private commerce. If Microsoft does not want to tempt the risk of being perceived as a traditional monopoly that merits traditional antitrust recipes, it has to become more open and transparent in the way it presents itself to competitors, customers and the government.
Now, there should be no doubt that Microsoft has managed its business in a way that has allowed many independent software developers and distributors to flourish. But at the same time, there should be little question that Microsoft hopes to dramatically expand into all kinds of media markets.
As long as Microsoft aspires to set the technical standards of the industries in which it competes, government and society are entitled to insist that those standards are set and managed in the most public way possible.
