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Fair Justice for Microsoft?

By Mario

Date: January 8, 2002

On December 12 last year, the Senate Committee on the Judiciary held a hearing titled: The Microsoft Settlement: A Look to the Future. The testimony of course had two viewpoints, those in favor of the proposed settlement and those against. Those that testified or submitted written testimony, were asked to look into the future and express their opinion as to how the proposed settlement would keep Microsoft's behavior within the law, taking into account their history of breaking the law and 'agreed to' consent decrees.

Having read the testimony and the Court's Findings of Fact, I for one am against the proposed settlement because it will maintain the status quo. This will mean the continued absence of any compelling competition on the desktop. Any one of a neutral disposition, who has read the testimony and the Court's Findings of Fact, can clearly see the lack of justice when viewed against this landmark judgment.

The Supreme Court has explained that a remedies decree in an antitrust case must seek to ‘unfetter a market from anticompetitive conduct,' Ford Motor Co., 405 U.S. at 577, to ‘terminate the illegal monopoly, deny to the defendant the fruits of its statutory violation, and ensure that there remain no practices likely to result in monopolization in the future,' United States v. United Shoe Mach. Corp., 391 U.S. 244, 250 (1968); see also United States v. Grinnell Corp., 384 U.S. 563, 577 (1966).

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Where does the proposed settlement, 'terminate the illegal monopoly' and 'deny the defendant the fruits of its statutory violation?'

From the Court's Findings of Fact, Netscape, Sun, Apple, RealNetworks, IBM, and Intel, have all suffered lost business because of Microsoft's anti-competitive behavior. From their standpoint, the proposed settlement must just look like a slap on the face. Where does the proposed settlement 'terminate the illegal monopoly' and 'deny the defendant the fruits of its statutory violation?' These two fundamental principles of remedy have not been addressed at all. Microsoft's market position will not change if this proposal is implemented. Remember what happened to AT&T's illegal telephone monopoly, and how that break-up brought to the consumer choice, better service, and lower costs. If this proposal is accepted, those who buy Microsoft's products will continue to pay over the top rates to use them.

If implemented, the proposed settlement that the DOJ has succumbed to will not change the industry for the better, but will continue to leave the consumer, government, and business, over a barrel, to suffer Microsoft's continued exploitation, whose ill-gotten gains (profits) continue to line the pockets of those company officers responsible for creating this illegal monopoly. This can only be seen as 'payback' for breaking the law, and sets a terrible precedent for future antitrust litigation. Let's hope that Judge Kollar-Kotelly has the courage to turn payback into blowback.

Let's remember that well known and often used adage, once bitten twice shy. Microsoft has chosen, all too often, to stretch forth its hand and eat from the forbidden fruit. It is now time that they were punished and expelled from their Eden of milk and honey. Microsoft has to be penalized with penalties that bite, which go way beyond the kindergarten settlement we have here today. This has to be done for two fundamental reasons. First symbolic. Microsoft has to be seen to be punished, which has to be commensurate in effect to the way it dealt with companies that it illegally competed against. This punishment will then draw a line in the sand, which for the future will bring to remembrance and serious reflection the serious penalties for stepping beyond the law. Second for competition. The market has to be given time to normalize to a competitive environment. Regulation, not another consent decree, will be required until market conditions allow companies of substance to hold their own against a convicted monopolist. Microsoft should not be left in a position where it is able to repeat conduct that the Supreme Court unanimously found illegal.

The public comment period for U.S. v. Microsoft is now in effect. The proposed final settlement has been published in the Federal Register, so the clock is ticking. Those of us who wish to be heard, have until January 26 to let our views be known. If you want to have a better choice of competing software at lower cost in the future, then now is the time to make your voice heard. If you don't, you will not have any excuse to complain in the future if software continues to be too expensive.

Update: Comments and responses by the public can be sent by email, facsimile, or postal mail. These will be published in the Federal Register and filed with the Court.

email: Microsoft.atr@usdoj.gov In the subject line of the email, type Microsoft Settlement.
                              
facsimile: 202-616-9937 or 202-307-1545

postal mail: Renata Hesse, Trial Attorney, Suite 1200, Antitrust Division, Department of Justice, 601 D Street NW, Washington, DC 20530

Those who wish to lobby the Senate Committee on the Judiciary, can find member details here:

http://www.senate.gov/~judiciary/members.htm 

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The paragraphs below are testimony extracts from the committee hearing. All of the testimony given can be read here.


Senator Patrick Leahy, Chairman

The proposed settlement that the Department of Justice and nine States have transmitted to the District Court offers a plan for the conclusion of this landmark antitrust litigation. It must now pass the legal test set out in the Tunney Act to gain court approval. That test is both simple and broad, and requires an evaluation of whether the proposed settlement is in the public interest.

There is significant difference of opinion over how well the proposed settlement passes this legal test. In fact, the States participating in the litigation against Microsoft are evenly split, with nine States joining in the proposed settlement and nine non-settling States presenting the court with an alternative remedy. As the courts wrangle with the technical and complex legal issues at stake in the case, this committee is conducting hearings to educate ourselves and the public about what this proposed settlement really means for our high-tech industry and for all of us who use computers at work, at school, and at home.



Senator Orrin G. Hatch, Ranking Republican Member

Mr. Chairman, as you know, we conducted a series of hearings in this Committee in 1997 and 1998 to examine the policy implications of the competitive landscape of the then burgeoning high-tech industry, which was about to explode with the advent of the Internet. Those hearings focused on competition in the industry, in general, and, more specifically, complaints that Microsoft had been engaged in anti-competitive behavior that threatened competition and innovation to the detriment of consumers. Our goal was, and I believe today is, to determine how best to preserve competition and foster innovation in the high-technology industry.

Although the Committee, and I, as its Chairman, was criticized by some, I strongly believed then, and continue to believe now, that in a robust economy involving new technologies, effective antitrust enforcement today would prevent the need for heavy-handed government regulation of business tomorrow. My interest in the competitive marketplace in the high-technology industry was animated by my strong opposition to regulation of the industry, whether by the government, or by one or few companies. As we may remember, the hearings before the Judiciary Committee developed an extensive record of Microsoft's conduct, and evidenced various efforts by the company to maintain and extend its operating system monopoly. Those findings, I would note, were reaffirmed by a unanimous, and ideologically diverse Court of Appeals. The Microsoft case - and its ultimate resolution - present one of the most important developments in antitrust law in recent memory.


 

Mark N. Cooper, Ph.D., Expert Witness

Mr. Chairman and Members of the Committee,
My name is Dr. Mark Cooper. I am Director of Research of the Consumer Federation of America. The Consumer Federation of America is the nation's largest consumer advocacy group, composed of two hundred and seventy state and local affiliates representing consumer, senior citizen, low-income, labor, farm, public power, and cooperative organizations, with more than fifty million individual members.

Our analysis leads us to conclude that an unfettered software market will produce a flowering of innovations and consumer-friendly products that are well worth waiting for. More importantly, we have estimated that monopoly pricing by Microsoft has cost consumers between $10 and $20 billion. An amicus brief filed with the court put the figure at $25 to $30 billion.

Of equal importance are the non-economic and indirect ways in which Microsoft's anticompetitive practices become burdens on the consumer. The trial record demonstrates, with extensive evidence, repeated instances in which Microsoft's anticompetitive practices have the effect of denying consumers choice, impairing quality, and slowing innovation.

Microsoft forces computer manufacturers to buy one bundle with all of its programs preloaded. It biases the screen location, start sequences and default options making it difficult if not impossible to choose non-Microsoft products. Products tailored to meet individual consumer needs (consumer friendly configurations and small bundles) are unavailable. Because of Microsoft's leveraging of the operating system, superior products are delayed or driven from the marketplace. Existing libraries of content (documents, movies, audio files) are rendered obsolete. Resources are denied, investment in competing products is chilled, and technology is slowed. Valuable products never get to market because of the barriers erected by Microsoft and eventually competing products disappear from the market.


Michael E. Kertzen, CEO of Liberate Technologies

Mr.Chairman, Senator Hatch, and other members of the Committee, thank you for the chance to peak on this critical topic. The Proposed Final Judgment is woefully inadequate. It is a backward-looking document that fails to prevent Microsoft from abusing its monopoly position to increase costs and stifle new technologies -- not just for personal computers, but also for new technologies like digital televisions, cellular phones, game consoles, and personal digital assistants.

Microsoft has already announced its intent to expand its dominance beyond PC operating systems, servers, and applications to new devices and even personal information via its "eHome" and "Passport" initiatives. According to comments made by Microsoft President Steve Ballmer just last week, Microsoft is pursuing a "broader concept" for its client devices like the xBox and set-top box software. In his words, "[T]here's a bigger play we hope to get over time" by annexing all of these devices into the Microsoft empire. Microsoft's own demos and white papers show that it plans to establish its operating system as the software that would collect information streaming into the home and distribute it to each new device.
Microsoft has used and will continue to use its monopoly over desktop operating systems to deny competition in each new computing market as it evolves: first desktop applications, then internet browsers and servers, and now alternative devices ranging from smart phones to television set-top boxes.

By dealing only with a narrow category of Windows products, and failing even there to impose any significant restrictions, the Proposed Final Judgment fails to check Microsoft's demonstrated willingness to exploit its power over the operating system in order to dominate other market segments.

Throughout my career, I have both partnered with and competed against Microsoft. I have been impressed by the power of its dominant platforms, but also concerned about the abuses that resulted from that dominance. I have seen Microsoft consistently use its power to block competition in new markets through at least three types of misconduct that the PFJ does nothing to deter: (1) Preventing original equipment manufacturers from supporting new technologies; (2) Tying commercial restrictions to investments; and (3) Blocking non-Windows-based industry standards.

 


Mathew J. Szulic, President and CEO, Red Hat, Inc.

Open source software arose because of a lack of alternatives that allowed the individual to choose the best tool for the job. Over the past 5 years, projects created by Red Hat and the open source community have become solutions of choice in areas of standards-based Internet software development, areas that the monopolist does not yet control.

The growth of the Linux operating system is an example of this acceptance. The Apache web server is another, it now holds a market-leading position.

However, the Internet browser, desktop operating system and office productivity software are areas that have continued to be influenced by one vendor alone.

One of the reasons I am so deeply troubled by the consent decree in this case is that it seems to run counter to things that are fundamental to our identity as Americans. We value fair play, ethical competition, abiding by the rules and fostering innovation. The consent decree throws all of this away. It acknowledges that my competitor has broken the law; that through these violations it has built one of the most formidable businesses in the world. Yet the consent decree does little to prevent future misconduct. I feel if the antitrust laws are not enforced, the will and spirit of the true innovators will suffer.

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