Microsoft Antitrust Decision – At Last!

After more than four years of to-ing and fro-ing we may have finally gotten to the bottom of the Microsoft antitrust case.  You may look at the results from a number of different points of view.

Thank Goodness, That’s Over

Most folks are likely to say “Thank goodness, that’s over.”  That was certainly the mood in Redmond at 7:15 Friday night, as Bill Gates and Steve Ballmer read statements on the U.S. District Court Ruling on the settlement and then fielded a few questions.

The official Microsoft reaction, in its first statement, was:

“We are pleased that the court has conditionally approved the settlement we reached with the federal government and the nine states. The settlement is a tough, but fair, compromise. It imposes significant requirements on Microsoft, but it enables us to continue to innovate and to create products that address the changing needs of our customers. We recognize that we will be closely scrutinized by the government and our competitors, and we will devote all the time, energy and resources needed to ensure that we meet our responsibilities.”

 

In the formal press briefing, Gates noted that Microsoft was already taking specific steps to meet its obligations under the settlement, including making it simpler for computer manufacturers to replace Microsoft software with the software of their choice, making licensing easier, appointing a compliance officer, and training their employees.

 

He also noted that the economy and the technology had changed greatly since the initiation of the lawsuit and that its termination would free Microsoft to “keep innovating for our customers.”  He said he was “pleased that with this case behind us we can focus on building new technology.”

We’d add that considering the state of the economy and the stock market it would not have been a good time for either a ruling which Microsoft would have had to appeal or for one which guaranteed that the dissenting State Attorneys General would carry on the case. 

Of course, neither side was prepared to say that they weren’t appealing (it takes more than an hour or two to read through that much stuff), but the initial posturing makes it seem unlikely.

We noted that both sides, while noting that they hadn’t entirely gotten their way (more truly for the dissenting States than for Microsoft), they had made important victories.  When both sides can claim they’ve won something, it’s a lot easier to declare the battle over.

What Happened

What was going to happen was pretty much pre-ordained.  The Court is limited by both the law and by its procedures.  It could only accept or reject the settlement for the Federal case (that is, for the proven monopoly case and the proposed settlement that Microsoft had agreed to but the dissenting State Attorneys General had protested). 

The Judge (who I think was amazingly perceptive, cutting through a lot of the industry spin that was going on in her court room), wrote in an Executive Summary, which is the quick way to understand the decision, especially if you’re not a lawyer, that she could not permit anyone to create a new case in her courtroom based on any behavior for which Microsoft had not already been judged guilty in the trial.  In other words, you can’t add in new evidence after the trial is over and expect that to affect the penalty and you can’t have a penalty for an act that is legal (there was lots of that going on, I believe).

Therefore, she accepted the federal settlement and then crafted a few “tweaks” for the State Attorneys General case which make it more palatable to them:

1. She changed the make up of the oversight committee from the original Technical Committee to the Compliance Committee so that it now consists only of outside directors and a Compliance Director who will become a Microsoft employee but who has a duty to inform and document the knowledge and compliance of the corporation and its officers and executives.
   
   

2. The judge intends that the court will maintain oversight as well and will hold the officers and executives of Microsoft accountable for compliance.  This compliance is for five years, extensible to 7 years should Microsoft fail to behave properly.
   
   

3. She changed the language of the settlement from ordering Microsoft not to retaliate against OEM’s and other business partners to also ordering them not to threaten to retaliate (again, the attitude thing).

The Attorneys General also get a continuing role in the enforcement of the settlement, which seemed (at least last night) to please them.  They like being looked to as the protector of the consumer.

You can get copies of all of the decisions (the decision in the Microsoft antitrust case and the Executive Summary and the separate State decision at http://www.dcd.uscourts.gov.

Industry Reaction

I’d summarize this by saying it’s mainly too soon for much.  I’ve seen a bit already of the type I think shows a basic misunderstanding of the antitrust laws.  Complaining that this doesn’t disadvantage Microsoft and help smaller developers is pretty much a non-starter.  The antitrust laws aren’t intended to help smaller developers except to the extent that a larger company does something actionable under an antitrust law. 

The fact that bigger, more mature companies get to create profitable and enduring businesses is not an antitrust issue.  It might be a political issue, but I doubt it.

It is true that much new and innovative software is created in smaller, newer companies.  There is nothing – other than the facts of our business works – that keeps these companies from being successful.  The fact that hundreds, perhaps thousands, of new software companies start every year – and that some of them are quite successful – provides all the counter argument necessary. 

It’s also important to remember that neither governments nor competitors are responsible for the business errors of other companies. 

	Apple might have been the owner of the GUI operating system market if it had been smart enough to license its software in 1984/5 instead of insisting on keeping it to itself to insure higher margins (but no mainstream market).  That’s Apple’s fault, not Microsoft’s or the U.S. government’s.
	We could go further back in history and note that Xerox had a chance at the PC market and blew it by not understanding pricing, or manufacturing and marketing to a volume, mainstream market.  Too bad, but scarcely anyone else’s illegal act.

The Real Question

The real question should be what will happen now that the case is settled, assuming it is?

1. Will Microsoft behave differently, under scrutiny.  By that I don’t mean will they comply.  I’m assuming they will.  Rather, I’m asking whether they will, let other antitrust defendants before them (IBM comes to mind), become so much more conservative in their behavior that it affects their business opportunities?
   
   

2. Will companies who have the opportunity to do business with Microsoft (especially small software companies) feel safer or less safe as a result of this settlement.  (This is really, I’m sure, what the article I read and referenced above was all about.)
   
   

3. What will longstanding Microsoft rivals/enemies do?  Never mind Netscape, they don’t exist any more, but what about Sun?  Will this settlement discourage them from competing or encourage them?

In the final analysis it’s these future affects, in the industry, that will determine whether this decision was a good one.  We won’t be able to make that determination for a while – probably not for three years or more.

(back to top)  

Comments or Questions: Send Email to opinions@wohl.com

Home/ Search / 2005 Articles / Issue Archive / Free Newsletter

Entire contents © 2001  by Amy D. Wohl. All rights reserved. Reproduction of this publication in any form without prior written permission is forbidden.