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Sunday, Jul 5, 2009
Is the Justice Department's decision not to pursue a breakup of Microsoft a big wet kiss from Bush, or just smart strategy? The experts weigh in.
Sep 6, 2001 | Is history repeating itself? In 1981, an incoming Reagan administration dismissed an antitrust case against IBM that had been in the works for 13 years. On Thursday, the Bush Department of Justice announced that it would not pursue a breakup of Microsoft, and, perhaps more important, was dropping its attempt to prove that Microsoft had illegally "tied" its Web browser to its Windows operating system, thereby giving the company an unfair advantage over competitors.
At first glance, Microsoft's foes could be excused for throwing up their hands in exasperation. In come the Republicans, out goes the antitrust enforcement. After years of testimony, evidence, cross-examination and countless appeals to higher courts, a simple change in administration could be seen as the most significant determination of legal strategy and outcome. An administration that has rapidly established itself as one of the most corporate-friendly in recent memory is backing away from the fight, pledging to end the whole unseemly mess "as quickly as possible."
But the initial appraisal from lawyers, antitrust specialists and Microsoft observers has been more cautious. Although the D.C. Circuit Court of Appeals threw out Judge Thomas Penfield Jackson's order to break up Microsoft on the grounds that the judge had been unprofessional in admitting anti-Microsoft bias to reporters, there is every reason to believe the appellate court would have found some other excuse to dismiss the order even without the cover of Jackson's behavior. And even though the appellate court ruled that Microsoft had indeed broken the law by abusing its monopoly power, it also ruled that the Department of Justice had not proved its charge that Microsoft was guilty of illegal "tying."
So one could easily argue that the DOJ is making the best of what it has, focusing its case on the specific points in which the appellate court ruled in its favor -- such as Microsoft's penchant for illegally using its power to force computer vendors to accept exclusive deals that put other software companies in disadvantageous positions. The issue is particularly relevant to the upcoming rollout of Windows XP, which has put the spotlight on Microsoft's ongoing attempts to control icon placement on the new desktop.
Certainly, the first stock market reaction, which saw Microsoft shares falling on fears that Windows XP would be delayed, suggests that investors see a real chance that there might still be some iron in the government backbone.
But for many critics, icon placement, while important, is not as crucial as the advantages Microsoft gains from bundling new software applications with its operating system. If the Department of Justice is not going to pursue the tying charges, then Microsoft is free to blend into XP whatever it wants -- including such popular (and hotly contested in the marketplace) applications as its sound and video MediaPlayer technology and its instant messaging software. The question of whether bundling à la Microsoft is illegal has long been at the heart of the antitrust case -- now the Department of Justice is essentially saying to the public, "Never mind."
For those with a historical perspective, the parallels to IBM are all too obvious. A Bush administration would have been unlikely to initiate antitrust proceedings against Microsoft, and it's not difficult to imagine that it would like to wash its hands of this Clintonian legacy "as quickly as possible." The federal appellate court, by vacating the remedy order and refusing to uphold the finding that Microsoft had engaged in illegal tying, has given the Bush DOJ ample cover for staging an orderly retreat.
Over the course of the antitrust trial, Salon has regularly turned to a stable of experts to gauge each new twist and turn in the saga. Here are their reactions to the latest news.
John Heilemann, author of "Pride Before the Fall: The Trials of Bill Gates and the End of the Microsoft Era"
I think it's a shame that they didn't decide to pursue the tying remedy. It's very complicated because antitrust law was easier to interpret when the products were physical products. In this case, it was a very novel question for antitrust law -- how you figured out the tying in the context of a product made of intellectual property, the commingling of code.
It was an open legal question. What the appeals court said was not that Microsoft was innocent. What it said was that Judge Jackson had used the wrong standard. It asked the lower court to apply a different standard. The fact that the Bush administration is not going to pursue this claim means essentially that it's still an open question.
To the extent that this case matters in the long term, it sets rules for how antitrust applies to the software industry. This was a really important issue to resolve, because it would tell a lot of companies -- software companies, chip design, all platform companies -- what is legal and what is not legal. By not pursuing that claim, the Bush administration has essentially abandoned the pursuit of a clear legal ruling on that subject.
All of this has happened now, and in the end we still don't know what is legal and what is not legal. We're in the dark. If Microsoft is innocent then great, I'd like to know why they're innocent and then people can go forward. I really do believe that if you're principled and pro-Microsoft you would want for this issue of integration to get resolved.
I think that a lot of people will assume that because the Bush administration is not pursuing the tying issue that this is legal. And that's not right. We're going to keep having this argument now forever, until the courts come out and say one way or the other. We're going to keep having this battle forever.
