| BUSINESSWEEK ONLINE : DECEMBER 13, 1999 ISSUE | ||||||||
| ||||||||
 | ||||||||
| LEGAL AFFAIRS
Commentary: Why Not Hit Microsoft in the Piggy Bank? Surprise, surprise. It has only been a few weeks since U.S. District Judge Thomas Penfield Jackson issued fact findings in the Microsoft case, and already plaintiffs' lawyers are jumping on the bandwagon. Class actions accusing the company of overcharging for the Windows operating system have sprouted in California, Florida, and Louisiana. Tort king Stanley Chesley, who made a fortune off lawsuits ranging from Agent Orange and breast implants to the Bhopal disaster, is boasting that damages in his recent suit against Microsoft Corp. (MSFT) could total $10 billion. We've been through this drill many times before. A big company gets into trouble, and within minutes the plaintiffs' bar races to the courthouse to cash in. Usually, the lawyers are the big winners from these instant suits--while the actual victims of the corporate misconduct receive only a fraction of the cost of their injuries. VALUABLE TOOL. Given this history, it's tempting to dismiss the new wave of litigation against Microsoft as a useless exercise that will only enrich lawyers. But while the motivation of some plaintiffs' attorneys may be selfish, the private suits could prove to be a valuable tool for controlling the company's behavior. Why? Because Chesley and his ilk can do one thing that Justice Dept. antitrust chief Joel I. Klein can't: force Microsoft to pay for its alleged misdeeds. Federal antitrust law bars the government from imposing a fine in this type of case. That's too bad, because the closer you look at the remedies available to the trustbusters, the better monetary penalties look. Right now, Klein has two choices. He can slap William H. Gates III on the wrist by imposing ''behavioral'' remedies designed to prevent Microsoft from engaging in specific predatory practices, such as forcing customers to sign contracts preventing them from using rivals' software. Or he can seek a permanent ''structural'' solution, such as breaking up the company. Both approaches have serious shortcomings. The behavioral remedies are easy to evade. A breakup would solve this problem but might create an even worse one: It's possible, for example, that the mini-Microsofts might start selling competing operating systems with inconsistent standards--which could increase the cost of computing. In contrast, an old-fashioned fine has lots going for it. For starters, it would provide at least some compensation for those injured by the company's conduct. It would also spare Microsoft from a breakup--a risky piece of social engineering that feels extreme at a time of robust innovation and economic growth. Finally, a big monetary penalty would give the company ample incentive to obey the law in the future. Under a little-known rule, plaintiffs in private antitrust suits are entitled to receive triple damages. While the $10 billion figure cited by Chesley seems far out for a single lawsuit, it's easy to imagine how the combined claims of all potential plaintiffs could reach that level, or even higher. If the government's accusations hold up on appeal, it will be easy for lawyers to show that Microsoft's actions cost consumers and rivals billions. Given that these damages would be tripled, Microsoft's potential exposure is huge--and certainly big enough to make the company change its ways, even with its $19 billion hoard of cash and securities. That's not to say that a monetary penalty alone is a sufficient punishment. But in combination with a tough package of restrictions on Microsoft's conduct, it would be enough to ensure that the company doesn't abuse its operating-systems monopoly in the future. A big fine, in essence, would give behavioral punishments a lot more backbone. As a result, the rising private litigation against Microsoft may give Klein and the state attorneys general enough confidence to forgo a messy breakup. And that, ultimately, could turn out to be the wisest path. By Mike France _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
|  |
 | |
RELATED ITEMS Commentary: Why Not Hit Microsoft in the Piggy Bank? TABLE: Open Season INTERACT E-Mail to Business Week Online | |||
