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To: Bearded One who wrote (22613)2/7/1999 5:15:00 PM
From: Rusty Johnson  Respond to of 24154
 
Why should they be able to keep their monopoly from dying a natural death?

That's hitting the nail on the head. Well put.



To: Bearded One who wrote (22613)2/8/1999 12:46:00 PM
From: Daniel Schuh  Read Replies (2) | Respond to of 24154
 
Microsoft Trying to Rebuild Tarnished Case nytimes.com

Here's the NYT story of the day, Bearded One. As a long running hearts and minds guy on the matter, I find it interesting. As this story points out, and as I've always agreed, the investor impact of the suit is still unclear and may not be bad even if it ends in a breakup. There's a long time before the day of reckoning, with appeals going up to the Supreme Court, perhaps even before the very hypothetical issue of remedies comes up. As a long running advocate of both open software and the "sucks less" variant of "what the consumer wants", I'd say the emergence of Linux is probably more important than this trial in holding Microsoft in check. The trial sure is entertaining, though.

As a courtroom interrogator, David Boies, the Justice Department's lead trial lawyer, has few equals. He cross-examines like a jazz musician, starting with a few themes but mostly improvising. He constantly probes for embarrassing weaknesses.

He confronted Schmalensee of MIT with his previous writing, which seemed to contradict his testimony. He forced Paul Maritz, a group vice president at Microsoft who is a product and marketing whiz (but not an economist), to defend the company's thinnest economic argument -- that it is not a monopoly.

Microsoft's legal team says the Boies approach is more show than substance, leaving most of the direct testimony of Microsoft's witnesses unchallenged and trying instead to make them look bad on the stand.

Perhaps, but he has succeeded in that.

"He's done a very good job of rattling Microsoft's witnesses and Sullivan & Cromwell," the company's law firm, said Stephen Axinn, an antitrust litigator who is a partner in Axinn, Veltrop & Harkrider.

Yet in its antitrust battle, Microsoft has three levels of concern.

The first is public relations -- and its reputation is a bit mud-spattered as a result of the trial. The second is the trial verdict -- and the expectation, even on Wall Street, is that the company will absorb a loss of some kind in Jackson's court, though the lasting verdict will be rendered by a higher court.

The third, and overriding, objective for Microsoft is defending what it regards as its way of life, the way it does business. Antitrust experts and Wall Street investors doubt that the government will win the kind of unqualified victory that would justify sweeping remedies like splitting up Microsoft or forcing the licensing of its Windows programming code.

That is a key factor behind Microsoft's buoyant stock price, which has advanced 56 percent since the trial started. Investors are not ignoring the antitrust case, but it is currently a "back-burner issue," said Richard Sherlund, an analyst at

Goldman Sachs & Co. As a verdict nears, however, he said the company's shares could retreat $10 or $15 a share, based on worries about the outcome.

The real skittishness most likely will arrive if the government gets an opportunity to propose remedies. David Readerman, an analyst at Thomas Weisel Partners in San Francisco, said, "That's when investors will really be on the edge of their seats, watching the news wires minute by minute."



To: Bearded One who wrote (22613)2/9/1999 1:43:00 AM
From: Gerald R. Lampton  Respond to of 24154
 
That's absolutely impossible. Not just practically impossible, given the fifteen million lines of Windows 98, but absolutely impossible.

I think you are making it seem harder than it really is. Microsoft wishes it were impossible, without a doubt, but the law deals with problems like this all the time, usually by placing on the party with the evidence the burden of producing it. On the other hand, the contervailing consideration is that the government, as the plaintiff, has the burden of proof in antitrust cases.

With the usual caveat that this is only my opinion, and I have no idea what the court will do, it seems to me that the problem could be solved without having to go through 15 million lines of code, as follows:

First, Microsoft articulates what it contends is a plausible beneft of Win95/IE integration, which it has done in this case through Devlin's testimony that developers view the Win/IE platform as a unified whole consisting of a number of DLLs and APIs, including those distributed with IE.

Second, the government could remove the IE DLLs/APIs from its copy of Win/IE and see if Windows still runs. If Windows still runs, then we know that Windows did not need those DLLs/APIs to function, and their integration into the whole is a plausible benefit. We can stop here, because Microsoft has met its burden. If not, then at least part of the DLL/API in question should be considered part of Windows that was placed in IE to make Windows crash in the event IE were removed, and we go to step 3.

Third, at that point, the burden shifts to Microsoft to identify the specific code in that DLL/API that is needed to run IE but not needed to run Windows. If they can do it, then they have met their burden. If not, they lose on that claimed benefit.

I can accept the argument that in a natural monopoly situation, consumer welfare may not be advanced by regulation of that monopoly. I am less sanguine about the argument that the owner of a natural monopoly should be allowed to take steps to maintain the monopoly. After all, if market forces unencumbered by a monopolists power would destroy a monopoly, then who is to say that the monopoly should continue to exist? Are we talking about protecting a monopoly for the benefit of the consumer?

Microsoft didn't have a monopolists power when they were gaining their monopoly. So if they can't keep it without using monopolists power, why let them? Even with their hands tied by the government, they are *way* stronger than anyone else out there. They could have come up with the idea of the browser before Netscape. They could have invented Linux. They could have invented Java. But they didn't. Why should they be able to keep their monopoly from dying a natural death?


If you have read Hayek carefully, you will already know the answer to this.

I think that Microsoft would say that you have mischaracterized what the government is trying to do. When they started out as a small company, they had the same legal rights that every other company had, including the freedom to use whatever legal means they want to compete.

They got big because, according to them, they did a better job of competing than anyone else -- "execution," I think it's called. Regardless of whether they are right, or they got to where they are by luck, sharp practices, or whatever, the point is that they did it legally.

Now that they are big, the government wants to slap a bunch of restrictions on them that do not apply to everyone else in order to "level the playing field," in the name of "fairness," "choice," "consumer welfare," or whatever end the government is pursuing in this case.

So, Microsoft would say that, yes, the monopoly should be allowed to die a natural death, if that is what is in store for it, but that a true definition of the market is one which recognizes that they should have the same rights to compete that every other company has, and allowing the government artificially to restrict one company's rights to compete is itself a distortion of the market the government claims it is trying to preserve.

But these are just the same old tired arguments we have all heard before, and I apologize for repeating them.

Go back and read Justice Fields' dissent in the Slaughterhouse Cases. His views did not prevail on the issue in the case, the proper scope of the privileges and immunities clause. However, you will not be reading the opinion for that; you will be reading it for his extensive discussion about the English common law of monopoly, which was designed to protect the right of every person to pursue the trade of his or her choice, one of the "liberties" we do not recognize today, but which was recognized at English common law, and which Justice Fields wanted to have the Constitution protect through the Privileges and Immunities Clause.

According to Justice Fields monopoly was illegal at English common law because it violates the equal rights of all to pursue and compete in any given vocation or trade. I think he would say that this is one of the fundamental "liberties" of Englishmen, which the Americans fought the Revolution to defend. He would also say that the primary means by which this liberty was to be protected was through strict adherence to the fundamental, bedrock principle of English common law that the government must respect equally the liberty of all to engage in a trade and to compete against others who do so by treating all producers equally.

Although the type of monopoly Justice Fields was talking about, a government sanctioned patent or exclusive license, is different from the private trusts the Sherman Act was intended to outlaw, it may be that the drafters of the Sherman Act intended to extend these same principles to the field of private monopoly which the Sherman Act was intended to cover. In any event, the Sherman Act was passed only about 20 years after the Slaughterhouse cases, and arguably Justice Fields' view of the scope of economic liberty, though it did not prevail as a matter of constitutional law, was the common view among the drafters of the Sherman Act. Again arguably, they did not intend that Act to violate the right of every person to pursue any trade and to be treated by the government just like all other producers in the market place.

So the principle that the government must treat all porducers equally arguably operates as a fundamental limitation on governmental power to regulate either government-sanctioned or private monopoly. Even though we no longer recognize the "liberties" the people of the Nineteenth Century did, their intention not to contravene those liberties is nevertheless a limitation on the power of the government to regulate private monopoly under the Sherman Act.

Bork would probably say Justice Fields was "confused," as is everyone who disagrees with him. But the Sherman Act is a codification of common law, which invokes and balances many different principles in the name of its objective.

I think Bork would say that that objective is maximization of consumer welfare. Hayek, I think, would say that the principle that the government must treat all producers equally is, in the long run, a stronger protection of consumer welfare than is any scheme the government can dream up to restrain Microsoft in the name of those two goals.