Court held to have avoided issues central to Microsoft suit

By David J. Craig

John D. Rockefeller dominated an entire industry until the federal government dismantled Standard Oil Company in 1911. So it's no surprise that since 1997, when Microsoft was hit with its own antitrust suit, members of the media have likened Bill Gates to Rockefeller.

But according to Ronald Cass, dean of the School of Law, and Keith Hylton, a LAW professor -- consultants to Microsoft on the case -- the antitrust cases against Standard Oil and Microsoft differ in at least one important aspect. While Standard Oil was found to have engaged in price-fixing and a variety of other illegal business practices, Microsoft became the preeminent player in personal computers, they contend, in part because of peculiarities in that industry.

"People are saying that this case reflects a new kind of antitrust problem that's unique to high-technology industries," explained Hylton at a LAW forum last month. "It's referred to as the economies of scale, or increasing returns. It's the notion that once you make a big up-front investment in preparing software, you have a phenomenon of increasing returns because to run off and sell additional units of the software costs close to zero for the firm.

"Moreover, there is something at work here called network externalities," Hylton continued. "That means as more people use your software and your product, your product becomes more valuable. Among law professors, for instance, it helps to know that your colleagues use the same software as you do if you're going to be sending one another documents."

In the suit against Microsoft, the U.S. Justice Department and 19 states allege that the company used its leverage in the computer industry to snuff out innovations that threatened its dominance. In particular, it is alleged that Microsoft included Internet Explorer in its Windows operating system in order to eliminate competition from Netscape's Web browser, Navigator. Microsoft claims that competition to control operating systems -- which serve as platforms for other programs used in personal computing -- is fierce, and that Windows and Internet Explorer should be considered a single product.

Keith Hylton, a LAW professor (left), and Ronald Cass, dean of the School of Law, discuss the federal government's antitrust suit against Microsoft at a public forum at LAW last month. Photo by Michael Hamilton

The Microsoft case is "the most important antitrust case of our generation," according to Cass. "It's one that people are going to be writing about for a long time."

In issuing the first part of his decision on November 5, U.S. District Court Judge Thomas Penfield Jackson ruled against Microsoft on almost every point contested in the case. He concluded that Microsoft held monopoly power, sold Windows at reduced prices to companies that agreed to take actions that would harm Microsoft's competitors, and that Microsoft rewrote a version of the programming language Java in a way that would allow it to run only on Windows. A final ruling later this year will determine whether or not such actions violate antitrust laws, and if so, what remedies to order.

But oddly, Cass and Hylton said, an aspect of the case that fascinates academics has not been raised in the court proceedings. Jackson's handling of the case, they said, has not been influenced by the theory that there is something unique about the computer field that suggests a different set of legal standards be used in a high-tech antitrust case. Instead, said Hylton, Jackson has relied largely on standard antitrust doctrine and focused court proceedings on what he refers to as "very bad behavior" on the part of Microsoft.

It is not an oversight, Cass said, that this theme has been absent from the courtroom: neither side has raised it. "If you're the government, and you emphasize the interdependencies of computer networks, you have a problem because such network effects benefit people who share the same platform on which different applications are written," he said. "So that helps Microsoft's argument. On the other hand, Microsoft doesn't want to dwell on network effects because it implies some power to whomever it is that controls the network."

As a result, the government has built its case