Tutt:Actually when pressed he said to date there was no harm but in the future the consumer might be harmed if MSFT was given too much power in the market place. Total speculation. This was the testimony from the mouth of the government economist,whose name escapes me at the present, (I think it was Fisher - a hostile witness) under cross examination.
As promised here is a pro MSFT legal view of the case. I apologize if the guy sounds an awful lot like me. He is however a latecomer to the commentary as this was published 10-11-99 . Notwithstanding he places in terms of art, in more more concise and somewhat more coherent form, sentiments that I have expressed over the past months.
Techinvestor please note the conclusion that an indecisive settlement will leave a cloud over the whole issue and only invite future government meddling in the market place.
Antitrust upside down: the Microsoft case
by Donald G. Kempf Jr.
Special to The Times
WITH the cast and crew of "Microsoft: The Trial" winding things up in the trial court (and perhaps also off talking settlement behind the scenes), it's a good time for the rest of us to take stock. The government's original "tying" case - that the integration of Internet Explorer into Windows 98 is an illegal "tie" of two separate products - has long since been abandoned as terminal. Instead, the Department of Justice is now pursuing industry egalitarianism, "a level playing field for all." Along the way, this ever-changing case has become the DOJ's most misguided antitrust enforcement effort since its decade-long quest to slay perceived monopoly dragons at IBM - but far more dangerous.
As the IBM case progressed, a consensus developed that the DOJ's case lacked substance. Just the opposite seems to be happening at the Microsoft trial. A case viewed as frivolous (and potentially harmful to competition) by most appears to have gained momentum as a result of courtroom foot-faults by Microsoft: seemingly ill-prepared witnesses, flawed demonstrations, unfortunate e-mails and defense schizophrenia roughly akin to defending a dog-bite case on the grounds that "I don't own a dog; if I did own a dog, my dog didn't bite you; and if I did own a dog and my dog did bite you, then my dog is insane." Thus, there is some speculation that the DOJ might actually win the Microsoft case. It shouldn't.
The Clinton trust-busters' antitrust analysis in the Microsoft case has things precisely backwards. Viewing the Sherman Act as a sort of civility code, they want to stop Microsoft from flexing its economic muscles and beating up on its competitors. But the Supreme Court had it right when it stressed - more than a quarter century ago - that, to the contrary, the "antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise," guaranteeing "the freedom to compete - to assert with vigor, imagination, devotion, and ingenuity whatever economic muscle (a business) can muster."
Ever since, the rule of thumb in the courts has been that hard competition in which one party inevitably makes a sale or increases its market share at the expense of another is neither unfair nor a violation of the antitrust laws. After all, the antitrust laws were not designed to immunize competitors from the public-serving rigors of the market place; rather, they were supposed to advance the system of free competition to the fullest extent practicable, all to the end that the consuming public might receive better goods and services at lower prices.
The DOJ also has it wrong when it seeks a Balkanization of product offerings simply because most competitors don't have the capability to meet as many of the customers' needs as Microsoft does. Sound antitrust policy should permit a firm positioned to meet buyers' needs to prosper as a reward for its efficiencies and abilities to increase consumer welfare. Consumers generally benefit when a firm that competes in several fields seeks the competitive advantages of its broad-based activity: more-efficient production, greater ability to develop complementary products, reduced transaction costs, and so forth.
Unfortunately, today's antitrust enforcers appear less interested in the reality of competition than in the facade - lots of competitors whose "success" is assured by depriving consumers of their present unrestricted ability to purchase bundled offerings that quickly and easily provide them with a high-quality, low-cost package they want. This wrongheadedness evokes the scenario described by Kurt Vonnegut in "Welcome to the Monkey House":
"The Year was 2081, and everybody was finally equal. They weren't only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General."
Such enforcement policies that focus on facade rather than reality sacrifice creativity, productivity, quality and efficiency.
A "the more-the-merrier" approach that tries artificially to fashion a marketplace with lots of "competitors" - but none with too big a market share - ignores the economic reality that, for any sector of the economy, the appropriate number of competitors (be that as few as one or as many as 100) is generally best determined through the unfettered workings of the free market. Probably the worst way to go about it is judicial determination at the behest of government regulators spurred on by competitors who are "disadvantaged" in the market. Many courts have emphasized in this regard that the antitrust laws protect competition, not competitors.
As the Supreme Court stressed more than 40 years ago, the Sherman Act was designed to be a "comprehensive charter of economic liberty" aimed at preserving free and unfettered competition. Its premise is that "unrestrained" competitive interaction yields "the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic, political and social institutions."
A contrary rule - such as urged by the DOJ in the Microsoft case, where the aggressively competitive conduct the antitrust laws were designed to promote itself serves as a basis for Sherman Act liability - would turn the antitrust laws upside down and could deter (or even prohibit) desirable competitive behavior. It could transform the antitrust laws from a powerful weapon aimed at promoting competitive practices into a shield that instead would protect businesses ill-serving consumers and struggling in the marketplace from the effective competition of rivals.
Throughout the Microsoft trial, the trial judge and the public have been treated to tidbits of inflammatory rhetoric from Microsoft's seemingly inexhaustible supply of e-mails. To be sure, such evidentiary fragments make for great media coverage. But as one court has observed, lawyers "traipsing through the warehouse of business" so that they can "rummage through business records seeking to discover tidbits that will sound impressive (or aggressive) when read" reduces the accuracy of decisions.
The DOJ has been using such evidentiary fragments for the dual purposes of distracting attention from the fundamental flaws in its case and undermining Microsoft's credibility. Still, ultimate disposition should not turn on locker-room jingoism - "Microsoft is going to kill Netscape" and "the Yankees are going to murder the Padres." And the core issues of the case - sound antitrust policy and ensuring that consumer interests come ahead of competitor interests - don't really turn on credibility. Thus, at the end of the day, Microsoft not only should, but likely will, prevail.
Settlement would be a mixed bag. On the plus side, both for the company and consumers, Microsoft's "antitrust distraction" would be reduced, and the company would be able to focus more on what it does best - efficiently meeting the needs of consumers. On the other hand, regulators emboldened by their press clippings are apt to insist on restrictions that, while benefiting Microsoft's competitors, will ill-serve consumers. Worse still, such an outcome might encourage regulators and private litigants to pursue similar suits against leaders in other industries, particularly those involving emerging technology.
Because a settlement would not resolve underlying issues, the antitrust saga would likely continue - opening soon: "Son of Microsoft." And sequels are almost always worse than the original.
Donald G. Kempf Jr. is a senior partner in the Chicago office of Kirkland & Ellis and is one of the country's leading antitrust and trial lawyers.
JFD |
