U.S. District Court Judge Thomas Penfield Jackson delivered his long-anticipated ruling in the Microsoft antitrust suit earlier this week. To no one’s surprise, he ordered that the software giant be split in two. Microsoft will now appeal. The case is likely to take a special “fast track” to the U.S. Supreme Court, although the U.S. presidential election could yet influence the outcome. Yet no matter what the eventual result may be, there is little indication that Microsoft has learned much from this long-drawn-out ordeal. That is, in many ways, the cause of the entire mess.
Understanding the case is as simple as ABC. “A” is for abuse. In November, Judge Jackson issued preliminary findings of fact that Microsoft had monopoly power in the market for personal computer operating systems and used that power to harm consumers, computer manufacturers and others. An attempt to negotiate a settlement between the company, the U.S. government and state attorneys general that had joined the suit failed. In April, Mr. Jackson ruled that Microsoft broke U.S. antitrust law by abusing its monopoly in personal computer operating systems in a way that harmed consumers and intimidated competitors.
“B” is for breakup. After requesting that the two parties propose remedies, the judge ruled this week to split Microsoft in two. One company would own the operating system, which is currently installed on 80 percent of computers around the world. The other company would own Microsoft’s other software and online businesses. In addition, the judge imposed restrictions on Microsoft’s business conduct, such as forcing the company to give other software developers greater access to the Windows source code.
Finally, “C” is for Microsoft’s credibility — or lack of it. While cleaving the company in two is a drastic move, the judge argued that he had little choice. In his decision, Mr. Jackson said Microsoft had proven to be “untrustworthy in the past” by ignoring his orders in a 1997 injunction. Nor are there signs that the company has changed its ways. “Microsoft, as it is presently organized and led, is unwilling to accept the notion that it broke the law or accede to an order amending its conduct,” Mr. Jackson explained.
It is easy to sympathize with the judge’s frustration. Company officials have repeatedly denied that adverse rulings would have any impact on their business practices. Days before his ruling, Microsoft delayed the unveiling of its new strategy on the next-generation Windows operating system, which continues the process of consolidation and integration that has troubled the judge and the company’s critics. Microsoft cited the upcoming decision as the reason for the delay.
The jury is still out on the wisdom of the remedy. Mr. Jackson hopes to increase competition, and to encourage the development of other operating systems and programs that can run on them. Ultimately, consumers should be rewarded with more choices. That was, after all, the nub of the case. The issue was not Microsoft’s dominance of the market for software for personal computers. Rather, the key questions were how Microsoft obtained and maintained that overwhelming position.
Microsoft’s supporters argue that splitting the company will raise prices, led to a bewildering variety of standards or, worse, create two monopolies. They claim that Microsoft’s size and reach make the company more efficient and facilitate the integration of applications with the operating system. The growing frustrations with buggy, bloated software and increasing security problems suggest that is only half the story.
Now the case moves to the appeals court. Once Microsoft requests an appeal, the Justice Department can ask to have it sent directly to the Supreme Court, which could rule before the year is out. Mr. Jackson has said that he wants to see the case resolved quickly, but Microsoft may prefer a delay. In addition to the hope that the election might change the government’s opinion of the lawsuit — admittedly a long shot — Microsoft could want to see the case go the normal route, as it has had some past success in the appellate courts. That could delay a final decision two years or more.
The best solution would be a negotiated one between the two parties. Despite the ruling, discussions are continuing. There is little reason to expect them to bear fruit. Throughout the process, Microsoft has stonewalled, denying that there is a problem or that it accepts the court’s reasoning. That attitude lies at the root of this ongoing controversy. Until it is changed, the problems will persist. It is as simple as that.
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