A monopoly game with new rules

The ruling weakens Microsoft, but also shows how hard it is for antitrust law to keep up with technology's pace.

By , Staff writer of The Christian Science Monitor

For years, many consumers have felt like tortoises next to the blurring speed of technology change.

A deeper and possibly more troubling question arises from this week's landmark antitrust ruling against Microsoft: Can America's judicial system keep up with the Computer Age?

Judge Thomas Penfield Jackson left little doubt that the nation's century-old antitrust rules still apply to contemporary corporate behavior. Just as earlier rulings against Standard Oil and AT&T exacted heavy prices for using monopoly positions unfairly, Microsoft seems set for stinging remedies after further hearings later this year.

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But in the two years since the Microsoft case went to trial, the technology landscape has changed so significantly that some see the ruling as having less and less practical impact, making it all the more difficult to find effective remedies.

In short, legal experts see a growing gap between courts' power to impose standards and an industry that regularly remakes itself, its products, and its ways of doing business.

"This case illustrates the challenge quite well," says Bryan Ford, a law professor at Santa Clara University in California.

If technology's pace of change eventually slows down, he says, the problem will solve itself. "But if you believe ... this period of ferment will not slow, you should worry, because the judicial system is already too slow now to give us practical remedies in a responsive time frame."

For instance, when this case went to trial, the industry was animated by "browser wars," and Microsoft was charged by the Justice Department and 19 states with unfairly leveraging its dominance in operating-system software to also control programs for accessing the Internet. That war against rival Netscape is effectively over and Microsoft won. Analysts say the legal issue is moot.

"If the purpose is to right what has already been wronged, I don't think much will happen. No government agency is going to force people to take Microsoft's Internet Explorer off of their computers," says Frank Catalano, a technology analyst in Seattle.

Still, government prosecutors haven't ruled out urging Judge Jackson to impose the ultimate hardball remedy: Breaking up Microsoft into smaller units.

But just as Microsoft's dominance has become a seemingly unalterable fact of life in some spheres, broader changes are afoot that have lessened its role in the technology universe. The judge's formidable task: finding remedies based on past practices that are fair in a new setting.

"The whole technology world since the trial [began] is very different," says Haim Mendelson, co-director of Stanford University's Center for Electronic Business and Commerce.

Two trends in particular cut Microsoft's clout, he says. The first is the proliferation of rivals to the personal computer, devices such as smart phones and the Palm Pilot, where the Redmond, Wash., giant has no dominance. Second is the skyrocketing importance of the Internet, an arena that Microsoft came to belatedly and that operates on open standards that cut against Microsoft's approach, Mr. Mendelson says.

As if to underscore the Web's surging importance, Microsoft was displaced in recent days as the world's most valuable company - a mantle it took from General Electric in 1998 - by Internet hardwaremaker Cisco Systems.

Robert Litan, a former Justice Department official now at the Brookings Institution, agrees that the gap between the courts and the technology sector is widening. Yet even if the remedies have less clout because of industry changes, he says the trial has exacted a heavy price on Microsoft.

"The lesson is that if you are a monopoly, you can't take actions that unfairly entrench that position. If you do, you'll be dragged through the mud," Mr. Litan says. He points to the cost in dollars, public reputation, and company focus. "Look at all the executives that have left Microsoft."

If those penalties have already been exacted, it's less clear when and if specific court-imposed remedies will ever take effect.

The ruling found Microsoft had violated antitrust law on all the grounds alleged by the government except one - a charge that the company made deals that effectively blocked rival Netscape from distributing its browser.

But the company, Jackson ruled, did violate the Sherman Act by inducing companies not to develop products that would work on something other than Windows, Microsoft's operating system. And the firm forced manufacturers to promote only its Internet Explorer browser, and designed Windows 98 to make it nearly impossible to remove Explorer, a practice called "tying."

Microsoft released a statement by chairman Bill Gates, saying that while it would continue to look for ways to resolve the case without further litigation, "we feel we have a strong case on appeal."

Litan predicts the tying issue will be the core of the appeal. The firm can argue that Windows with Internet Explorer is not tying, but simply a better product.

Even if Microsoft ultimately loses on appeal, many analysts say the company has calculated that time is on its side. By the final ruling, perhaps years away, the industry landscape will be so different that a judge may be persuaded the issues have become irrelevant.

But by branding the company a lawbreaker, the ruling could open the floodgates to civil-damage claims. "This case is providing a road map for civil litigants and how to win," says Mendelson. If Jackson's ruling is upheld, he says, a wave of civil damages could become one of the sharpest "remedies" against Microsoft.

*Special contributor Dean Paton contributed to this report.

(c) Copyright 2000. The Christian Science Publishing Society

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