by John M. Curtis
(310) 204-8700

Copyright November 14, 1999
All Rights Reserved.

urning antitrust law on its head, U.S. District Judge Thomas Penfield Jackson dealt free enterprise another painful blow, ruling that Microsoft used its monopoly power to harm competition. Comparing Microsoft to Standard Oil or AT&T misses the essential difference between peddling energy or utilities and the innovative world of high-tech and computers. Old definitions of antitrust, monopoly, unfair trade practices don't easily translate into the patent and copyright world of cyberspace. "There are very compelling and powerful findings, picturing a predator [Microsoft] that has monopoly power," remarked Connecticut Atty. Gen. Richard Blumenthal, warning Microsoft, "It should lead to serious and far reaching remedies," including government ordered divestiture and eventual break-up. Taking exception, "Microsoft competes fairly and vigorously," said Bill Gates but so do its envious competitors like IBM, Apple, Intel and others. Sorting out the smoke from facts is like finding footprints at the bottom of a Louisiana bayou.

       Beginning in 1998, the government's action against Microsoft seems strangely correlated with AOL's purchase of Netscape Communications Inc.—their main competitor [Netscape Navigator] controlling about 23% of the browser market. Seeking to expand their book of business, AOL sought to displace Microsoft's Internet Explorer from the nation's leading computer manufacturers like IBM, Apple, Gateway, Compaq, Hewlett Packard, etc. AOL encountered one minor glitch: Microsoft bundled its popular Windows operating system with its browser, Internet Explorer. Selling computers is competitive enough, but expecting computer manufacturers to abandon Microsoft's Windows is like expecting Mercedes to sell their cars with Chevrolet transmissions. [GM and Ford still use different transmission fluids]. Can you imagine? Would you expect a Chevrolet transmission to work equally well in a Mercedes Benz? I don't think so. Nor would you expect any competitive car company to make their key parts interchangeable. It just isn't done. Why would you expect the computer industry to be any different?

       Drawing criminal inferences from internal Microsoft e-mails and 'secret' memos, the Justice Department pressed its best case against the software behemoth. But, as most people know, many unwise things are said on and off the record. When some executive shoots off his mouth or shows bravado it doesn't afford categorical proof of culpability. In and out of corporations, people say and do stupid things. Even internal Tobacco Industry memos—discussing the addictability of nicotine or target-marketing teenagers—don't provide incontrovertible proof of anything, other than some executive or manager beating his gums. Having said that, the current findings don't rule out a methodically planned, illegal corporate strategy designed to thwart competition. But there's more smoke being blown by the government and Microsoft than a Texas barbecue.

       When AOL—the nation's leading internet service company—acquired Netscape, they hit a well known roadblock: Microsoft's Windows operating system didn't cooperate. Crying foul, AOL and Netscape pressed their case to the Federal Trade Commission. Passing the buck, the FTC dished the complaint to the Justice Department to enforce antitrust laws. Since the trial began in 1998, the government and Microsoft have been trading blows but were mostly even on points. With Federal Judge Jackson's recent finding, the Justice Department landed a power-shot, hoping for a knock-out in the latter rounds coming up in January 2000. While the momentum seems to have shifted to the government, it's not over 'til it's over'. There's still plenty of room for both sides to strike a bargain and save face. Since most government attorneys earn their livelihood on Microsoft Windows, it's hard to imagine biting the hand that feeds them.

       But who's really blowing the smoke? Is the government's case against Microsoft really much ado about nothing? Or does Microsoft represent an insidious threat, stifling free enterprise and competition in the computer marketplace? Though AOL and Netscape hold this view, there's another side to the story. Surely IBM must take responsibility for developing a lead balloon like the cumbersome OS/2 operating system. Can the developers of Linux fault Microsoft for why their operating system hasn't caught on? Can the government really blame Microsoft for building a better mouse trap? How has Microsoft stifled competition by aggressively marketing the world's most user-friendly operating system? While many other companies want a piece of the action, that's not how free enterprise works: The winner usually takes all. Why should it be any other way?

       "The predatory nature of the acts are factual, not legal, questions," said James Loftis, a prominent Washington antitrust attorney. But who's the real predator? Envious competitors of Microsoft, whose own failures only added to Microsoft's cosmic successes? Responding to Jackson's salvo, "Microsoft is committed to resolving this case in a fair and factual manner, while ensuring that the principles of consumer benefits and innovation are protected," said a mildly stunned but no less determined Bill Gates—whose testimony seemed at times to hurt his own cause. For those in the industry, there's a fine line between protecting trade secrets, patents and copyrights, and engaging in willful conspiracies to sabotage your competition.

       Microsoft hasn't been accused by consumer groups of fixing exorbitant prices to its Windows operating system, Internet browser or anything else. Most monopolies cause harm to consumers by stifling competition and unfairly hiking prices. While certain disgruntled competitors have cried foul, how many consumer groups have complained? Not a single one! Who has been harmed: consumers or corporations? Clearly, there's room for good neighbors like Microsoft to share technology and spread around the wealth. But exploiting antitrust laws to satisfy the frustrations of envious competitors turns the present system inside out.

About the Author

John M. Curtis is editor of OnlineColumnist.com. He’s also the director of a West Los Angeles think tank specializing in human behavior, health care and political research and media consultation. He’s a seminar trainer, columnist and author of Dodging The Bullet and Operation Charisma.

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