The Time to Settle Is Now
There are at least eight reasons that Bill Gates needs to e-mail the Department of Justice today to jump-start serious settlement negotiations aimed at ending the present government antitrust suit against Microsoft.
Gates’ open letter, published as a full-page ad in the Washington Post last week, showed good judgment and hinted at interest in a peaceful resolution of the lawsuit. Cases settle when parties possess a great deal of information about the strengths or weaknesses of their cases and where there are huge risks to the parties that could come from a fully litigated court judgment.
The window for a favorable settlement, now open, will soon begin to close. Here are the reasons to settle now:
* The trial court has set up an ingenious procedure that encourages the parties to now hold serious settlement negotiations. Friday’s “findings of fact,” the first step in three planned phases of rulings by U.S. District Judge Thomas Penfield Jackson, will be followed by Jackson’s legal conclusions and, finally, by the hardest and most difficult phase, determining a remedy. This time-released “trifurcation” of the trial court’s final ruling virtually forces the parties to the bargaining table.
* Now that Microsoft has lost the “findings of fact,” it is obvious it will lose the “findings of law” phase.
* Microsoft will avoid, if it settles now, an almost certain finding that it violated the Sherman Antitrust Act. Such a finding would be invaluable to competitor plaintiffs in pending civil damage suits against Microsoft. An unfavorable ruling for Microsoft in the findings of law almost certainly will generate additional civil damages suits against Microsoft that would deter the company from its mission of technological innovation.
* Trial court findings, such as those entered by Judge Jackson, are almost impossible to set aside on appeal. They will stand unless they meet the standard of being “clearly erroneous.” Appealing Jackson’s rulings is a risky long shot.
* If Microsoft gets serious about settlement now, it can retain control of its own destiny. This is especially important in the fast-moving world of our leading software company. Indeed, one can argue that for Microsoft to continue its hard-ball litigation course is so risky that it invites claims of internal mismanagement. And, if Microsoft’s behavior shows that level of disorganization, why should the United States bother to negotiate?
* Joel Klein, the assistant attorney general in charge of antitrust, knows that things won’t get much better than they are at present. True, over the weekend, Klein gloated that even “structural remedies,” i.e., breaking up Microsoft into smaller companies, are now on the negotiating table. Nonetheless, Klein has many incentives to be realistic about settlement terms. The possible change in administrations in next year’s presidential elections is a major factor. As we know from history, Republican administrations can take a tough line on antitrust enforcement.
* Most antitrust experts would agree with former federal Judge Robert Bork that the result of the “findings” phase was predictable. This is an easy case; Microsoft holds a monopoly and has clearly exercised that power. However, past antitrust “victories” for the prosecution have frequently fallen flat at the remedy phase. The United States lacks a track record of prior cases in which the judge involved was able to craft remedies that really worked. While it is not difficult to see that Microsoft has been an active monopolist, it is tough to come up with a practical way to stop its past practices while allowing it to continue to innovate.
Certainly it is not in the interest of the American public to employ a structural remedy or to break up Microsoft. The judge knows that. Nor will he want to force Microsoft to share technology with competitors. Some form of “behavioral remedy” aimed at enjoining the type of hard-ball conduct condemned by Jackson seems wisest. Such a remedy might well include a form of forced sharing of information with Microsoft’s competitors. The trick is to arrive at a compromise that will work to achieve competition while encouraging Microsoft to continue to innovate.
* The subtlety and complexity of the remedy issue requires the type of creativity and innovation for which Microsoft and its competitors are so famous. In other words, the solution to this case requires the participation of Microsoft itself. The government attorneys know this. They are waiting for Gates’ telephone call or (even more fitting) his e-mail.
Earlier in the litigation, both sides talked settlement, albeit unsuccessfully. Now it is the time, indeed the week, to get serious about that settlement.
