Gates: 'Anti'Trust Me
The Microsoftsell Wears ThinThe Microsoft antitrust case, now in a bit of a tailspin from the company’s perspective, raises a fascinating paradox (polite society term for hypocrisy) about how political conservatives see the meaning of regulations, laws and markets. Their worship of market capitalism is built on a temple of disdain for government intervention in the creation or expansion of corporate wealth. Microsoft, by this logic, is the paragon of business success – an entrepreneurial triumph started by a couple of geeks with a garage and a dream who innovated their way to a stupendous fortune. Now, the argument goes, jealous quasi-socialist government lawyers want to prosecute and punish Bill Gates and Microsoft for the crimes of success and prosperity.
The hypocrisy – excuse me, paradox – lies in the very charges that the U.S. Justice Department has brought against Microsoft. Economic conservatives live and breathe competition and free markets. Microsoft was accused of clear and egregious violations of antitrust laws that bar anticompetitive business practices. Although one might imagine that antitrust is a labyrinthine legal realm of great complexity, the nation’s century-old laws on the subject are really quite simple and straightforward. The Sherman Act of 1890 covers the territory in effectively a single sentence: Contracts, combinations, or conspiracies in restraint of trade are declared to be illegal. When you get right down to it, American-style antitrust projects a conservative theory of business: The corporation is granted extraordinarily wide latitude to act in its own perceived social or financial interest, and gets into trouble only when it upsets the playing field of market competition.
Microsoft incurred the wrath of Klein (Joel Klein, the Justice Department’s antitrust chief) for a variety of business practices related to how it configures and markets its dominant PC operating system, Windows, and its popular Web browser software, Internet Explorer. Throughout a months-long trial in federal court that ended in late summer, Microsoft built its strategy around umbrage and hostility toward its accusers. Posturing somewhere between arrogant and defensive, the firm’s lawyers by the end of the trial managed to convince even sympathetic observers that a Microsoft-friendly outcome was unlikely. The bomb dropped in early November, when Federal Judge Thomas Penfield Jackson issued his findings of fact, which sided almost entirely with the Justice Department’s side of the story.
Let’s be clear about Judge Jackson’s ruling. The morning-after press coverage focused on the judge’s assertion that Microsoft has a monopoly in the PC operating system business. But the meat of the case against Microsoft – and of the judge’s findings – is not about having a monopoly; it’s about using it to thwart competition. Judge Jackson declared Microsoft’s monopoly only 16 pages into a 207-page ruling; he spent the next 191 pages documenting in painstaking detail the various ways Microsoft improperly leveraged that monopoly to preserve its market dominance and keep competitors at bay.
It’s perfectly legal to have a monopoly, but antitrust law bars you from using monopoly power to intimidate or discourage competitors. Jackson found that Microsoft, with by some estimates better than 95 percent market share in the Intel-compatible PC operating systems business, threatened and coerced PC makers, software developers and Internet content providers into ways designed to insulate the firm from threats to its market dominance in operating systems and its rising market share in Internet browsers. The judge’s finding of fact, it should be stressed, is only a preliminary ruling that lays out his conclusions of the factual story that emerged from (often conflicting) testimony. We await a ruling on findings of law that will decide whether the facts as now determined represent illegal antitrust behavior.
Microsoft’s reaction to the findings of fact was predictably dismissive. Bill Gates declared that "the heart of this case is whether a successful American company can continue to improve its products for the benefit of consumers." Writing for a friendly audience in the Wall Street Journal a few days later, Microsoft’s Steve Ballmer whined that "we never dreamed that competing vigorously and innovating rapidly would make us a target for lawsuits inspired by our competitors." You need only skim Judge Jackson’s ruling to see how far from reality this is.
Microsoft would have us see the whole affair as little more than a capricious vendetta aimed at a firm that innovates and competes with vigor. The company is joined in the charade by its newest friends – elected Republicans in Washington, who find themselves flush with cash from Microsoft’s recently discovered affection for conservative politics. Once a firm that proudly cultivated its independence from the political wars, Microsoft has gone establishment on us, hoping that a George W. administration will tell its Justice Department to just say "never mind."
The mystery is why conservatives are so quick to bask in Microsoft’s hubristic glow. You can adore market capitalism, be wary of government regulation and buy into the necessity of antitrust laws all at the same time with a clear head and a clear conscience. If American conservatism at the end of the century stands for anything, it’s the rule of law and the power of competition. Microsoft breaks the former to thwart the latter, and deals with the consequences with as much arrogance as it can muster. Conservatives have been had, and by a pro.
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