Microsoft Middle Ground

When U.S. District Judge Thomas Penfield Jackson ruled earlier this month that Microsoft used its monopoly to exclude competitors from the computer operating systems market, a chasm widened between the software titan, which maintains it did nothing wrong, and the U.S. Department of Justice, which wants Jackson to restructure Microsoft and end its oppressive domination of the computer market.

In fact, there already is a proposed out-of-court settlement that could serve the interests of both the government and Microsoft, and talks beginning today in Chicago offer the best chance to date of reaching a viable middle ground. That’s because the man mediating the talks, U.S. District Judge Richard Posner, is uniquely versed on both sides.

A leader of a conservative school of jurisprudence associated with the University of Chicago, Posner sympathizes with Microsoft’s opposition to government meddling with successful businesses. His writings have shown how government-imposed breakups of business monopolies can backfire. At the same time, Posner has also promised to uphold the antitrust laws that Microsoft has clearly violated. He now will have to show both sides why a settlement is clearly and increasingly in their self-interests.

For Microsoft, a settlement would prevent Jackson from ruling, as he is expected to do after resuming hearings Feb. 22, that Microsoft had violated specific antitrust laws. That ruling would expose Microsoft to further liability from class-action suits like the one filed last week in San Francisco alleging that Microsoft had overcharged consumers for its Windows operating system.

A settlement is also in the government’s best interest, for it would preclude the U.S. Court of Appeals and the U.S. Supreme Court, which have historically interpreted antitrust laws more narrowly than Jackson, from overturning his ruling against Microsoft.

George Washington University Law School professor William Kovacic and other scholars say that only two remedies now on the table can meet the self-interests of both sides.

The first remedy, “conduct controls” that would outline how Microsoft should behave toward its competitors, is highly impractical because it would require the kind of intrusive and labor-intensive government supervision that Posner opposes and the Justice Department can’t afford.

The second remedy--requiring Microsoft to lease to competitors its “source code,” the programming on which its software is based--is far better. Licensing the code would allow computer manufacturers to customize Microsoft’s Windows software to meet their customers’ needs, precisely the kind of innovation that any effective settlement must ensure.