www.opinionjournal.com/editorial/feature.html?id=95000750
A quotation from George Armstrong Custer would be more appropriate, if only he'd been available for a press conference after Little Big Horn. The government won on the central issue in the case: Microsoft was held to have monopolized the operating-system market in violation of the Sherman Act. On no count, moreover, was Microsoft's behavior found lawful. The charge of attempted monopolization of the browser market failed only because the government did not offer readily available evidence that browsers constituted a relevant market and that barriers to entry existed. Microsoft won not because it was innocent but because the government did not carry its burden. Much the same is true of the court's reversal and remand for trial on the issue of whether Microsoft's bolting of its operating system and browser into a single package was an illegal tying arrangement. Noting that the integration of products often benefits consumers, the court rejected a rule of per se illegality and remanded for trial under the rule of reason. The government will have to prove that the anticompetitive effect in the browser market outweighs any enhanced efficiency. Since Microsoft has never been able to articulate a plausible efficiency from the bolting, the government seems likely to prevail. For no discernible reason, much of the press has unquestioningly accepted Microsoft's jubilation that the Court of Appeals vacated the trial court's order that Microsoft be broken into two independent companies. Nobody, including the government's lawyers, expected that order to stand up. Microsoft was denied even the most rudimentary hearing on the appropriate remedy. Now there is to be a hearing, and there are compelling reasons to take divestiture seriously. But when the court addressed the charge of monopolization of the operating-system market, which was the core of the case, the news was all bad for Microsoft. The company was found to have destroyed the nascent threats to its operating system monopoly posed by Netscape's browser, Navigator, and Sun Microsystems' Java, a technology designed to work with any operating system. Singly or in combination, these could accept applications and thus threaten Microsoft's monopoly by making users and application writers indifferent to the operating system used. The attacks on Navigator and Java were exclusionary tactics without benefit, and promising ultimate harm, to consumers. Microsoft officials and lawyers are no doubt pondering the ramifications of that holding. There are a lot, most of them gloomy, if not cataclysmic. There is, to begin with, the trial on remand, which will consider whether the integration of the operating system and the browser was an illegal tie-in, as well as whether the remedy for monopolization of the operating-system market calls for structural alterations in Microsoft or only a forest of restraints on its future conduct. The latter question may be greatly influenced by evidence that Microsoft is continuing the same pattern of behavior with respect to new products that was found illegal on this appeal. Microsoft will continue to argue that any serious remedy would damage innovation. But Microsoft suppressed the innovation of Netscape, Sun and Intel. Its genius has been in business and predation, not innovation. Microsoft's response to the legal threat it continues to face is to unleash a swarm of lobbyists and lawyers upon the administration and Congress to urge a quick settlement. Judging from its past negotiations with the Department of Justice, the company will not accept any settlement that seriously inhibits its ability to engage in predation. If the administration is gulled with the argument that a quick and easy settlement would help the economy, it will make a serious mistake. The economy's problems, including poor corporate earnings, have nothing to do with Microsoft's legal troubles. Particularly after a 7-0 government win from judges of very diverse views, an easy settlement would be seen as blatantly political, a capitulation to a money-heavy lawbreaker left free to continue its monopolizing rampages. Even a settlement favorable to Microsoft would not end the company's peril. They are counsel to ProComp, an industry association that includes Microsoft competitors and supported the government case against Microsoft.
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