Legal and Economic Aspects of the Microsoft Case: Antitrust in the Information Age

By Hazlett, Thomas; Litan, Robert et al. | Business Economics, April 2000 | Go to article overview

Legal and Economic Aspects of the Microsoft Case: Antitrust in the Information Age


Hazlett, Thomas, Litan, Robert, Rockefeller, Edwin, Business Economics


PROMINENT SCHOLARS EXPLORE THE ISSUES

The outcome of the Microsoft antitrust case may have significant effects on those businesses that use Microsoft software and set important precedents for antitrust cases in the information age. This panel discussion provides background on some of the issues associated with the case. Important concerns are whether consumers of software products have been harmed by Microsoft's actions and whether they will benefit by the judicial remedy if Microsoft is found to have violated antitrust law.

Rockefeller: To begin the discussion, I will raise and answer two or three questions. First, what is antitrust? The term is not defined anywhere in the antitrust laws. I think it is appropriate to call attention, particularly in a context of people who have the benefit of academic detachment, that there is not necessarily any coherent set of discernible rules that constitute the antitrust laws. I would suggest to scholars new to the subject that the most valuable single book is Robert Bork's The Antitrust Paradox, published in 1978. In a new edition, published in 1993, Bork adds an additional introduction and an epilogue.

For the purposes of this discussion, we can take Sections 1 and 2 of the Sherman Act of 1890 to be the critical aspects of antitrust law. Section 1 of the Sherman Act says, "Every contract combination in the form of trust or otherwise or conspiracy in restraint of trade or commerce among the several states or with foreign nations is declared to be illegal." Section 2 of the Sherman Act says that "Every person who shall monopolize or attempt to monopolize or combine or conspire with any other person or persons to monopolize any part of the trade or commerce among the several states or with foreign nations shall be guilty of a felony." Those are the words of Congress and have been interpreted by the courts and others since 1890.

Now, what is the Microsoft antitrust case? It may be useful to know that some years ago the Federal Trade Commission began to look at Microsoft to determine if it was violating the antitrust laws. Two commissioners were of the view that something should be done; two commissioners were of the view that nothing should be done; and the fifth commissioner declined to participate. Thus, nothing was done by the Federal Trade Commission. However, the Department of Justice decided that it should look into the situation and initiated a proceeding that resulted in a consent decree, prohibiting certain conduct by Microsoft. The district judge to whom the decree was submitted regarded the decree as inadequate to deal with the conduct of Microsoft.

However, the Court of Appeals said that was not the District Court's job, but rather it was the Attorney General's job. Thus, the Court of Appeals sent the consent decree back to the District Court but to a different judge. Further, the Justice Department then concluded that on one point Microsoft was violating that decree and went to the District Court to seek penalties for that violation. Judge Jackson, before whom the current case is pending, concluded tentatively that Microsoft was violating that decree. Microsoft appealed that conclusion to the Court of Appeals. In the meantime, the Justice Department started another, broader proceeding against Microsoft in May 1998. Only a month later, the Court of Appeals reversed Judge Jackson's conclusion that Microsoft had violated the earlier decree. In the meantime, we have the May 1998 complaint on which Judge Jackson issued findings of fact that have received wide publicity.

Now, what has been decided? The judge issued four hundred or so findings of fact but not yet any legal conclusion. However, two of his findings of fact, I would suggest, form a good basis for this discussion. One was that Microsoft engaged in a concerted series of actions designed to erect a barrier to entry against competing software applications, and hence protect its monopoly power, from a variety of middleware threats. …

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