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The Railroading of Microsoft
How the antitrust laws stack the deck in court
against successful companies.

by Robert W. Tracinski

The press coverage of Microsoft's antitrust trial, up through the testimony of the final witness, has conveyed one consistent theme: Microsoft is losing. Its witnesses, we are told, have been caught in inconsistencies; Bill Gates' videotaped testimony was evasive; e-mails have shown Microsoft to be a ruthless competitor; and so on.

Much of this is due to the press corps' glee at seeing a big corporation take it on the chin, so that every point scored by the prosecution against Microsoft—no matter how insubstantial—makes the day's headlines. But this approach to reporting the trial also reflects the way in which the trial as a whole is stacked against Microsoft, making it almost impossible for the company to gain a victory in court.

Consider Microsoft's quandary. The company is accused of engaging in "aggressive" business practices that are "anti-competitive." How could Microsoft defend itself against this charge? Only by showing that it did not attempt to compete—that it did not take measures to meet the challenges posed by competitors.

Take the centerpiece of the government's case: Microsoft's attempt to promote its Internet Explorer web browser by integrating it into the Windows operating system. How could Microsoft have avoided this charge? Presumably, by not integrating the program with Windows, by not marketing it aggressively, by charging a higher price than its competitors (rather than giving Explorer away for free), or, ultimately, by not producing a browser at all. Yet to do any of these things would be to commit corporate suicide. It would mean giving up and remaining passive in the face of competition.

The antitrust laws have trapped Microsoft in a bizarre dilemma: its legal position would be strengthened if it stagnated and remained passive in the face of competition. Yet if the company continues to adhere to the virtues that made it successful—by continually upgrading its products to meet the challenges of competitors—it faces a greater risk of prosecution.

In other words, Microsoft faces legal punishment, not for its vices, but for its success.

Consider another major line of the prosecution's argument. Microsoft has been taken to task for demanding restrictive contracts in exchange for its cooperation with other software companies. The government cites one case, for example, in which Microsoft demanded that another company's program set Internet Explorer as the default browser. What, then, is Microsoft expected to do? Is it expected not to set any terms on its cooperation with other companies? Is Microsoft expected to enter business deals with no concern for how those deals will affect its own success?

No such demands are made of Microsoft's competitors, who routinely use the same tactics without fear of legal retaliation. The only difference is that Microsoft is more successful. Because it is the market leader, declares James Barksdale of Microsoft competitor Netscape, Microsoft should be required to "play by a different set of rules."

This assault on success can be seen in the most fundamental issue raised in the trial: Is Microsoft a "monopoly"? Microsoft can show (and has shown) that there are countless companies who threaten to come up with competitive products, such as Web-based applications which do not require Windows either to access or to operate. But prosecutors have "refuted" this evidence by showing that Microsoft is working hard to compete against these products. In other words, it does not matter that Microsoft is earning its dominant position by vigorous competitive action in the marketplace; it is precisely such action that is considered incriminating. Again, what would it take to answer these charges? Would Microsoft have to allow potential challengers to take away its customers, making no effort to lure those customers back?

All of these allegations against Microsoft sum into one basic complaint: Microsoft is competing "too much." For the market leader to engage in aggressive competition is, in the Orwellian language of antitrust, "anticompetitive." How is a successful company supposed to defend itself against these charges? By showing that it is not trying to compete, that it is not trying to sell its products, that it is not trying to succeed?

Unfortunately, that is precisely the conclusion supported by the history of antitrust. Remember that the Justice Department hounded IBM with antitrust charges for over a decade, only giving up when that company was surpassed by Microsoft and Intel—who quickly became the new antitrust targets. If that is case is any indication, the only thing that would satisfy today's prosecutors would be if Microsoft were to stagnate and fall behind the competition, just as IBM did. 

No wonder Microsoft appears to be losing: The terms of the antitrust case are skewed in such a way that no successful company could possibly defend itself. It cannot defend itself because its crime is its success.

What is needed to defend Microsoft is more than just a crack team of lawyers. What is needed is for the American people to reject the twisted standards of antitrust and to demand a stop to this assault on success.

Robert W. Tracinski is editor of the Intellectual Activist.

 

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