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Commentary: Justice Vs. Microsoft: Who's Got The Edge?


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COMMENTARY: JUSTICE VS. MICROSOFT: WHO'S GOT THE EDGE?

For months, the Justice Dept. has been agonizing over whether to pursue a new antitrust case against Microsoft Corp. Now that the agency is all but certain to do so by May 15--barring a last-minute change of heart by antitrust chief Joel I. Klein or a settlement with the company--the agency has something new to lose sleep over: how to win.

By any measure, trustbusters face long odds. Monopolization cases are so daunting that Uncle Sam has brought only two in the past half-century. AT&T settled and split into nine parts. IBM held out, and--after 13 years and 700 trial days--Justice dropped its case.

Microsoft will probably follow IBM's lead--fielding a small army of high-priced litigators and tying up the department in time-consuming court motions. The ugly fight between Microsoft and Justice over the 1995 consent decree could be a preview of things to come.

On the other side, Justice isn't suited for a marathon. Justice officials estimate the case would take several years to litigate, and that's optimistic. More likely, by the time a trial concludes, Klein and his regime will be long gone from the Antitrust Division.PREDATORY? Then there are the hurdles created by the case Justice is preparing. While Microsoft may be a monopoly, that in itself is not illegal. Justice must show that the company has used predatory tactics. That won't be easy. The precedents, including the Supreme Court's landmark 1977 Continental TV vs. GTE Sylvania decision, enshrine a laissez-faire approach under which it's difficult to attack a dominant firm's business practices.

As a practical matter, Klein has two choices. First, he can try to show that the intent of Microsoft's practices is to eliminate competition--not to help customers. For this, he would need documents or whistle-blower testimony to establish motive.

Klein's fallback argument: He can argue that the harm from Microsoft's practices outweighs any benefit to consumers and in the long run thwarts potential rivals that could make better products. Here again, he will have a hard time convincing the court: In a 1979 case, a film retailer lost its argument that Eastman Kodak Co.'s decision to change its film design--making it usable only in its own cameras--would hurt consumers. The court sided with Kodak, ruling that legal interference can stifle incentive to innovate. Microsoft will inevitably argue that integrating the browser and operating system makes computing easier. "[Making marketplace predictions] are the hardest judgments for an antitrust enforcer to make," says Washington lawyer Caswell O. Hobbs. "You are trying to imagine the `what ifs."'PROVE IT. It's also difficult to convince a court that a company chooses a particular product design to harm competitors. That was the repeated charge against IBM in private antitrust suits in the 1970s, notes William E. Kovacic, antitrust professor at George Mason University School of Law. Makers of so-called "plug-compatible" computer equipment accused IBM of deliberately changing its interfaces--the plugs--on mainframes to slow down makers of IBM-compatible peripherals. IBM maintained that the changes improved performance--and the courts ruled in IBM's favor each time. "The likelihood of victory in the courtroom is less than 50-50," says Kovacic. "The law since the 1970s has given defendants considerable freedom to choose pricing, product development, and promotional strategies."

No matter what the odds, though, Justice feels that it must go ahead. Win or lose, the trustbusters know that the Microsoft case will help establish how antitrust rules will work in the new high-tech economy.By Susan B. GarlandReturn to top

TABLE

Hurdles for the Feds

THE LAW

Justice's antitrust theories are untested. A federal judge may refuse to rule against Microsoft, since it's hard to prove consumers have been harmed.

THE OPPONENT

Justice has dozens of lawyers on the Microsoft case, but the company can afford to hire even more--who could out-paper the government team.

THE CLOCK

A major antitrust suit could last five years or longer. By the time the case reaches a jury, Joel Klein and his team may have moved on.Return to top


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