The Right Remedy: Split Up Microsoft

It has taken the government two years to persuade U.S. District Judge Thomas Penfield Jackson of the obvious--that Microsoft has been waging a predatory campaign to maintain its Windows monopoly, to seek dominance for its Internet Explorer and to restrain the marketing and research initiatives of companies as powerful as IBM and Intel and as weak as Apple.

The facts are clear, and Jackson’s conclusions of law are certainly consistent with the evidence.

Still, Bill Gates insists that his company did nothing to harm consumers and everything to benefit them. Indeed, controversy rages about the appropriate remedy, in part because the Windows operating systems are seen as a prominent part of technological changes and economic shifts that have benefited so many.

About 90 years ago, with a far less compelling record before them, the federal courts sliced John D. Rockefeller’s Standard Oil Trust into 34 pieces. Even after the breakup, there was so much public fear that the U.S. Supreme Court’s decision might pave the way for more carefully camouflaged monopolistic predation that Congress passed new legislation, which included creation of the Federal Trade Commission. Twenty-two states enacted their own antitrust provisions.

Like Standard Oil, Microsoft dominates an industry that is shaping our economy and, like Standard Oil, Microsoft forces those around it to adhere to standards it has set for the industry. Yes, it is true that, as Jackson found, Microsoft engaged in entrepreneurial conduct, but that was overshadowed by its predatory conduct.

Such are the commercial realities. Yet what captures public attention is a set of images that color those realities, in particular, the corporate images of Rockefeller in his time and Gates in his. A hundred years ago, Rockefeller, whether in political cartoons or in muckraking newspapers, was the most notorious of American robber barons who personified the industrial drama of a new century.

Nowadays, businesses mostly do not have recognizable faces--except for Microsoft. In the public eye, Bill Gates is Microsoft. He projects onto Microsoft the image of youthful exuberance, intelligence and innovation.

The reality, however, is that Microsoft and Gates have engaged in negligible innovation. The Windows “look and feel” was taken directly from Apple’s Mac OS at a time when intellectual property protection of software was weak. Today, Amazon.com can protect from infringement something as simple as a single-click technology. Comparable protection for Mac OS likely would have stopped Microsoft from licensing Windows.

Further, features added to Windows, including Internet Explorer, have typically been bought outright by Microsoft or were developed by Microsoft programmers based on existing software.

In fact, as Jackson has found, stifling innovation by competitors was central to Microsoft’s predatory campaign. As a result, not only rivals but also business partners and consumers have been harmed because they have no choice but to pay monopoly prices for PC operating systems that are less stable and less efficient than comparable software in competitive markets.

In this light, both the government plaintiffs and Jackson must consider remedies that reflect Microsoft’s corporate culture of predation, remedies that will establish competitive conditions in industries whose research and marketing have been blocked by Microsoft’s restraints of competition.

In short, the right remedy must begin with splitting Microsoft into several independent competitors, accompanied by appropriate safeguards that will maintain and develop industry standards for PC operating systems.

Innovation, Gates insists, is what Microsoft is all about. If so, only breaking up Microsoft will get him that.