What to Do About Microsoft? Antitrust Experts Offer Opinions
By JOEL BRINKLEY
nytimes.com
WASHINGTON -- Groups of experts from a score of universities nationwide are preparing recommendations for the government as the Justice Department and 19 states prepare for the penalty phase of the Microsoft antitrust trial early next year.
If, as expected, Judge Thomas Penfield Jackson finds Microsoft guilty of antitrust violations -- as his exhaustive findings of fact published nine days ago indicate he will -- a new proceeding will determine what should be done to be sure Microsoft can no longer illegally wield monopoly power.
A committee led by Timothy Bresnahan, a Stanford University economist, is preparing recommendations for the Justice Department, and a professor familiar with the panel's work said it was likely to call for changes that would restructure Microsoft or its products in some way.
Herbert Hovenkamp, an antitrust expert and law professor at the University of Iowa, is among the academics and consultants working for the states. In an interview last week, he said, "If the findings show significant abuse of monopoly power, then the appropriate remedy is to break up the monopoly -- not to hobble the company or try to regulate it."
For his part, Bill Gates, Microsoft's chairman, said he would like to settle the case and would be willing to consider any settlement proposal that protects the company's ability to add any features it wants to the Windows operating system.
In an interview in the issue of Time magazine that reaches newsstands Sunday, Gates was asked whether he might accept one oft-mentioned idea for a remedy -- forcing Microsoft to publish the source code for Windows so that competitors could create operating systems that were compatible with the vast library of software written for Windows. Gates said:
"The only thing that we know for sure would be bad for consumers is anything that blocked us from being able to innovate Windows, or anything that made it so that when people buy Windows they don't know what is in it. Beyond that we'll be as pragmatic as we can."
Late last week, The New York Times interviewed five other academic authorities or former government officials who maintain a direct professional interest in the case but are not attached to either Microsoft or the government. All have followed the case closely and have studied the judge's findings of fact.
Each was asked what remedy he would choose, if he were given the power to impose a solution. Three called for structural remedies. Two said they believed remedies that kept Microsoft intact but forced the company to modify its behavior would be sufficient.
But all agreed on one point: Any remedy should be "self-executing," as several of them put it. In other words, once imposed it should not require further oversight or interference from the courts or the government. On that point, at least, the Justice Department, the state attorneys general and, most likely, the judge agree.
Nicholas Economides, professor of economics, New York University
Economides teaches economics, including antitrust issues, and computer networking. He has written academic papers on the case, but avows, "I am not now and have never been involved in any litigation involving Microsoft."
Economides would put remedies in place that correct the specific allegations raised in the government's case but that would have little effect on future behavior because, he said, "one has to be very careful to be sure that the remedy is not worse than the present situation."
He describes himself as an admirer of Microsoft, adding, "I don't see how consumers were hurt when they were given a browser free, and Microsoft has not raised the price of its operating system." A key conclusion in the judge's findings is that Microsoft's decision to tie its Web browser to the Windows operating system was an anticompetitive act.
Economides would force Microsoft to rewrite its contracts with many or all of its partners, customers and suppliers, "to be sure that the violations in the suit," such as Microsoft's restrictive contracts with online service providers, "will not happen again." Of the concern that Microsoft might find a way to evade contract restrictions, Economides said, "I have confidence that smart lawyers will be able to work it out."
He also said he would require Microsoft to publish many of the software codes known as application programming interfaces that allow other software companies to "hook their programs to Windows." Netscape and other companies have accused Microsoft of withholding those as a penalty for failing to comply with requests from Microsoft. But he would force Microsoft to publish the codes only for Netscape and the other companies that were part of the suit.
Other companies facing similar problems in the future would have to make their own cases in court, he said. If stronger remedies were imposed, Economides averred, "consumers would lose."
William Baer, former director, Bureau of Compliance, Federal Trade Commission
he trade commission shares antitrust enforcement with the Justice Department, and Baer ran the agency's enforcement office until last month. He supervised the commission's antitrust investigation of Intel, which ended with a settlement last March. But Baer was not working for the agency when it last investigated Microsoft, in the early 1990s.
While Baer said he had not steeped himself in the merits of the specific remedies under discussion, he is clear on the principles he would work to uphold.
"If you start with a monopoly company that has unlawfully limited competition," he said, "the goal of any remedy has to be more than telling them, 'Go out and sin no more.' That approach would allow the monopolist to maintain the benefits it has gained from illegal use of its monopoly power.
"What you want to do is move the market back in the direction it would have gone but for the unlawful conduct. So the remedy has to be something structural."
While he was not willing to suggest a specific solution, he did say: "It would be something like licensing their source code, spinning off part of the company. Whatever it is, it should be self-executing.
"But my key point is this: What kind of lesson does a monopolist take if he is told, 'Please don't do this anymore,' and is allowed to keep all of his ill-gotten gains? If the judge found that Microsoft obtained its position illegally, then Microsoft should have to pay for it.
"A structural remedy also sends a signal to any possible future monopolists that they don't want to go down this road."
Robert Hall, economist, Stanford University
Hall comments on and writes about the case but says, "I enjoy the position of being neutral."
Of his proposed remedy, he says: "I can't claim that it will solve every problem. But the real issue is being sure that the remedy does more good than harm. So I think it needs to be conservative and clean."
Hall said he "admired the quality of the economic arguments in the judge's findings." And one good way to address them, he added, would be to prohibit Microsoft from "conditioning the sale of Windows licenses to computer manufacturers on anything other than the manufacturers' ability to pay for the license and to respect Microsoft's intellectual property."
Evidence presented during the trial showed that Microsoft threatened to withhold Windows from IBM and Compaq when those two companies engaged in other actions Microsoft did not like.
"A remarkably large number of problems shown in the suit would be resolved with this," he said.
Hall said he would also force Microsoft to revise its contracts to prevent predatory or exclusionary dealings with other companies. That would ensure that Microsoft did not condition its dealings with other companies on their willingness to support other Microsoft products or ventures, he said.
Hall acknowledged that his proposed remedies are "modest." But, he added, "I think this whole system is gong to work -- and work without strangling Microsoft."
Robert Litan, director of economic studies, Brookings Institution
hile deputy assistant attorney general in the Justice Department's antitrust division, Litan negotiated the consent decree with Microsoft that resulted from the department's previous antitrust investigation of the company, in 1995. The present case began when the Justice Department charged that Microsoft had violated that 1995 agreement.
Litan now says he believes another conduct remedy of the sort agreed to in 1995 "just invites more lawyering."
"Microsoft lawyers would immediately go to work going around it," he said. "It's like a dam. Leaks would spring, and you'd constantly be trying to stop them.
"So my proposal," he added, "would start with breaking the company in two -- one operating system company and another with everything else. But if you stop there, it'll be fraught with all kinds of problems. You'd have to continually be supervising the operating system company" to make sure it did not pursue other anticompetitive practices.
"So therefore I'm attracted to the idea of breaking the operating system company into three equal companies -- all with identical properties and activities. And then you let these three operating system companies loose to compete.
Gates, Microsoft's chairman, would choose which company he would lead -- one of the three operating-system companies, or the fourth one holding all of Microsoft's other products and services.
But the company's other senior leaders could not go with Gates. They would have to be spread among the other new companies. And the $18 billion in cash reserves Microsoft holds would be divided among the four new companies, too.
Critics of this idea, or variations of it, say they worry that consumers would soon be faced with incompatible operating systems. Litan said that would not occur in the short term because the companies would start with the same operating system code.
And if, as expected, the systems diverged in the future, other companies would spring up to write what he called "bridging programs" that would allow software for one operating system to work with the others.
"With these companies competing with each other, you'd get more innovation, and that's the goal," he said. "It may be that the trade for that" is the risk of incompatibility.
In the end, Litan concluded, "the operating system market will probably collapse over time."
"There may be just one left, one winner," he said. "But whoever won would be severely chastened by this case."
Steven Salop, professor of economics and law, Georgetown University
Salop has worked as a consultant for many computer and software companies, including some of Microsoft's competitors. He has also written about the case. And to him, "the record is sufficiently strong to support a strong structural remedy."
He added that a conduct remedy -- forcing the company to rewrite contracts or modify its behavior -- "is too intrusive and regulatory."
"It's not in the interests of the economy, or of Microsoft," he said. "What they want is to get this behind them once and for all so they get on with what they say they want to do, and that is -- innovate."
So Salop advocates "a hybrid remedy" -- exactly the same proposal Litan offered for dividing the company into four parts.
He rejects the idea long favored by the states of forcing Microsoft to auction the source code for Windows so that other companies could use it to develop competing operating systems.
"The source code is not well documented," he said. "It's not like the recipe for the new Coke. There are 30 million lines of code. You need access to information from Microsoft employees. So these new companies would start with a real technological disadvantage. Microsoft would leave them in the dust."
The beauty of his idea, he said, is that it is one-time and clean. "And we'd have competition in the operating system market." |
