Don’t Rule Out a Microsoft Comeuppance
Last Monday started out as just another super day on the otherworldly campus of Microsoft Corp., and even as news of the Justice Department’s antitrust action against the company began to spread, the cocky young managers who run the place barely broke stride.
“It’s ridiculous,” one opined, summing up the party line on government allegations that Microsoft forced PC manufacturers to install its Internet Explorer software in violation of an earlier antitrust settlement. “The government is going to decide that we can’t improve the operating system?”
The consensus view that the action was a nonevent was belied by just one glitch: The “demos” of Internet services being presented to a visitor weren’t working right, because the news had produced a traffic overload on the company’s internal network.
Arrogance, or at least a radical self-assurance, is a defining characteristic of Microsoft, so I wasn’t that surprised to hear contemptuous dismissals of the Justice Department. The palpable sense of prosperity and opportunity that washes across the campus--plush new buildings everywhere, massive construction projects promising many more--can make the U.S. government seem powerless by comparison.
What’s remarkable, though, is that so many on Wall Street and elsewhere in the technology community appear to share this view. The Justice Department’s move put nary a dent in Microsoft’s stock price; a chorus of analysts and other industry observers maintained that the government would lose in court, or that its actions would have no impact even if it won.
Considering how strong the government’s case looks, this is a peculiar stance. But it follows logically from the knee-jerk anti-government ideology that permeates the technology world these days. And that ideology, because it is in part self-fulfilling, may now do some serious damage to some of its most vocal proponents.
Let’s take the long view here for a moment. The first antitrust laws were written more then a century ago, and since then government lawsuits have broken up companies that were relatively more powerful than Microsoft is today--Standard Oil and AT&T;, to name just two.
Furthermore, the government has long been a central player in many major industries. Lawmakers, administration officials, regulators and judges routinely write detailed rules and make complicated decisions on difficult, highly technical issues in industries ranging from telecommunications and energy to aerospace, biotechnology and transportation.
They don’t always do it well. But the idea that computers and software are so uniquely complex that federal judges can’t possibly make reasonable decisions about them--a common thread among those skeptical of the Microsoft prosecution--is mostly a reflection of the self-importance of the technology elite. My experience is that federal judges often are very smart, and they’re paid to study tough issues and make tough decisions.
And the case at hand doesn’t even look that hard. Microsoft agreed in 1995 not to require PC manufacturers that install its operating system software to also take other Microsoft products, a practice known in antitrust terms as “tying.” Testimony made public by the Justice Department shows that Microsoft forced Compaq and other vendors to accept the Internet Explorer Web browser or face cancellation of their Windows 95 licenses.
Microsoft’s defense is that IE is actually part of Windows 95. But for the moment, at least, that’s simply not true. IE was developed separately from Windows, it’s distributed separately from Windows, and there are even versions of it for the Macintosh and Windows NT. If it walks like a duck. . . .
The issue might get more complicated when Microsoft combines IE with Windows in the next release of the operating system, scheduled for next year. Maybe that would be an “integrated product” that’s allowed under the 1995 consent decree. But for now, at least, the Justice Department seems to be on solid ground.
OK, the cynics say, Microsoft can simply make some small changes in its licensing practices for the short term, which would delay but not prevent it from annihilating Netscape Communications, its Web browser competitor. What the heck, it could simply pay the fine as a cost of doing business; $1 million a day isn’t all that much when your cash reserves are in the $10-billion range.
From a legal perspective, though, a finding that Microsoft had violated the decree would be a serious matter, one that courts would certainly consider in any subsequent proceeding. It could, for example, lay the groundwork for a scenario in which the ability of rival companies such as Netscape to interconnect their software with Microsoft operating systems was supervised by a court, in order to keep Microsoft from giving its own applications software an unfair advantage. Think of the requirements regulators place on monopoly telephone or cable television businesses.
The courts clearly have the power to do something like this, and while it wouldn’t be easy, it’s not self-evident that they wouldn’t be able to do it competently.
Blinded by its formidable track record, Microsoft doesn’t regard anything like this as a possibility. And the anti-government zeitgeist, which has drawn great strength from the Libertarian currents that crisscross the technology industry, makes it difficult for others to see the possibilities too--and makes it hard for the government to take action.
Once people have gotten used to the idea that government is basically venal, and certainly too inept to get involved with high tech, the political risks of trust-busting in the software business become significant.
The screaming irony in all this, of course, is that many of the people who would most benefit from an aggressive government stance against Microsoft are the very same folks whose rhetoric has made such a move less likely. Sun Microsystems Chairman Scott McNealy, to cite just one example, never misses a chance to take a swipe at the government, and then wonders why it doesn’t heed his backstage pleas to help him fend off Microsoft.
Microsoft, of course, is now reaping a public opinion windfall from the mood its enemies have helped to sow. How absurd for the government to decide what can be part of a computer operating system! “This is capitalism,” as Bill Gates himself said last week. It’s a favorite theme of his, one which carries the subtext that anything that happens as a result of market forces is, by definition, better than anything that happens as a result of government intervention.
But part of capitalism, at least in this country, is that you’re not allowed to get so big and strong that you can snuff out competitors at will. In many large, important cases, antitrust prosecutions have opened the way to new eras of competition and innovation. Technophiles should recognize that even government lawyers sometimes have a legitimate and useful role to play.
