Is Bill Gates' nightmare over?
The Microsoft antitrust case appears to be ending -- not with a bang, but with a Bush administration-brokered whimper. Our experts weigh in.
By Damien Cave, Katharine Mieszkowski and Andrew Leonard
Nov. 2, 2001 | Bill Gates says he is "pleased."
"Litigation is never a good thing for any industry or any company," he noted in a press conference held Friday to trumpet the proposed settlement between Microsoft and the U.S. government. Meanwhile, Attorney General John Ashcroft says he wants to express his "gratitude" to the antitrust division of the Department of Justice for all their "their hard work."
"The American people can be confident not only of the hard work that they have done, but of the result that they have achieved," said Ashcroft.
There's no doubt that the American people can be confident that the antitrust division lawyers put in a tremendous amount of work over the last three years. Whether they should be confident in the result is less obvious. The settlement, while ostensibly restricting some of the egregious practices by which Microsoft lorded it over the computer industry during the last decade, does little to prevent Microsoft from doing to some future Netscape precisely what it did in the browser wars.
In a nutshell, the settlement is supposed to restrict Microsoft from prohibiting "original equipment manufacturers" like Dell or Gateway from offering other operating systems or competing software applications on computers that also feature Windows. Microsoft is also supposed to release technical information that will help third party software and hardware vendors figure out how to make their applications work with Windows. And a technical review committee will be empowered to watch over Microsoft for the next five years to ensure that the company toes the line.
But there appear to be some significant loopholes in the settlement.
For instance, the company is specifically not required to divulge proprietary technical information for anything that might have to do with the "security of anti-piracy, anti-virus, software licensing, digital rights management, encryption or authentication systems." The area of digital rights management alone is certain to be a huge battleground in the future, affecting the online delivery of music, movies, books and other entertainment. In essence, Microsoft appears to have carved out huge swathes of potentially lucrative territory and put them off limits to competitors, with the explicit permission of the U.S. government.
It's possible that individual states will not accept the settlement -- it's also possible that European regulators will take a harder line. But for now, the bottom line is easy to read. Litigating may not be a good thing for any industry, but by successfully litigating its way into the welcoming confines of a Republican administration, Microsoft has gotten off the hook.
Norman Hawker, associate professor at Western Michigan University Law School and a research fellow at American Antitrust Institute
It's a travesty and I think it's appalling. The government had its greatest antitrust victory in nearly a century this summer with the unanimous decision from the Court of Appeals. And now Microsoft is getting off without even the faintest slap on the wrist.
The most egregious example of this would be the fact that there's no provision for penalizing Microsoft if they fail to comply with the order. All it says is that the order will be extended if they don't comply, but if you're not obeying it now, what difference does it make if the order stays in place for a few more years?
Also, before Microsoft had been found to violating the law under any court, they were willing to settle under much more restrictive term than this. Now, after winning in the district court and in the Court of Appeals, they have a weaker remedy in place. If you look at Ken Auletta's book on the case, you'll see that Microsoft had been willing to give up a lot more. Take the provisions about requiring disclosure, for example. They were willing to disclose the entire source code; now they're only disclosing part of the APIs [application programming interfaces]. Also, the retaliatory provisions -- they sound great: "We're not going to let Microsoft do uniform pricing." But there are all kinds of exceptions in there that they can use. Microsoft has an even bigger monopoly in its office suite, so they can keep their OS prices out of the mix and say we're not retaliating against you for not installing windows, but your MS Office price just doubled. Or they can say, we're not retaliating against you but we don't think you're handling Microsoft Office correctly so we're going to take away your license. There are all kinds of ways that they'll be able to truck through supposed restrictions.
The government was negotiating from a strong position. Microsoft, when they saw this settlement must, have thought it was raining pennies from heaven. It's rainwater turned into beer with the government agreeing to these terms. It's just amazing to me that they would agree to the weakest terms when coming from the strongest position.
How did this happen? The Bush administration does not believe in vigorous enforcement of antitrust law. They expected to lose in the Court of Appeals. When they won, they were put in the embarrassing position of winning a case that they were opposed to from the start. So now, a year from now, we'll be in no different position than we would have been if the government dropped the case. It's appalling.
Robert Litan, an economist at the Brookings Institute, who served as deputy assistant attorney general for economics in the Justice Department's antitrust division
The big issue here was whether Justice was going to go after Windows XP and any future software with some kind of un-bundling requirement. That was the big thing that was left off the table, and I think that we all got strong signals that they weren't going to do that when they dropped the tying case [the charge that Microsoft was illegally leveraging its monopoly over operating systems to take over the browser market].
This was foreordained. Once they dropped the tying case, to me they were signaling that they were not going to go after XP, and I think that philosophically this department is not comfortable interfering with software design, and they accepted Microsoft's argument there. Microsoft had maintained since the very beginning of the case that they want the freedom to design their own software. This settlement ratifies that.
Now, it doesn't mean that they will ultimately win because they still have to stare down the states and the European Union over this issue, and I'm assuming that some states will fight on. So, this isn't settled by any means, but this is obviously a big hurdle, because now they've convinced the Justice Department, and that was probably one of the biggest roadblocks in the way.
The problem is that in this industry things change all the time, and it's the same issues over and over again. Microsoft is constantly extending the scope of its software, and the people who are fighting it are constantly saying that they are unlawfully leveraging their monopoly and operating system, and again and again we have this argument. Microsoft now has won a big round, because they've convinced the Justice Department to leave them alone on product development. And that to me is the biggest victory for them out of this case, so far.
