NetAction Notes

Published by NetAction Issue No. 62 September 28, 2000
Repost where appropriate. See copyright information at end of message.

IN THIS ISSUE:

M$ and the Supremes: We've Already Won
About NetAction Notes

M$ and the Supremes: We've Already Won

Editor's Note: In May 1997, NetAction launched the Consumer Choice Campaign, an Internet organizing project aimed at convincing the U.S. Department of Justice to vigorously enforce anti-trust laws against Microsoft. Our substantive white papers on Microsoft (see: http://www.netaction.org/msoft/) are based on research and analysis by Nathan Newman, who served as project director for the campaign. In "From Microsoft Word to Microsoft World," a white paper we published in November 1997, we recommended splitting up the company. After Judge Penfield Jackson issued his ruling that Microsoft be broken into two separate companies, we asked Nathan to comment on what the ruling means for consumers. In light of this week's discouraging news that the U.S. Supreme Court will not take the case under expedited review, Nathan's commentary reminds us of just how much has already been achieved as a result of the Justice Department's actions.


M$ and the Supremes: We've Already Won

By Nathan Newman

Technology watchers are understandably disappointed by the U.S. Supreme Court's decision not to hear the Microsoft case this fall under so-called expedited review. This is something consumer and citizen groups like NetAction had hoped for, since it would have bypassed the historically pro-Microsoft D.C. Circuit Court of Appeals and possibly have lead to quick enforcement of Judge Penfield Jackson's sanctions against Microsoft.

But even if the sanctions against Microsoft are ultimately reduced, it is worth emphasizing how much the forces of consumer choice and technology innovation have already won from the Justice Department antitrust suit. Critics of the suit lament that cutting Microsoft into separate companies or other sanctions would be costly and inefficient.

They miss the point.

Punishment is always costly and inefficient, whether we are locking people in jail or sanctioning rogue corporations. The ultimate point of the law, though, is not to punish but to deter wrong-doers from committing their crimes, whether preventing them in the first place or dissuading them from continuing their criminal activities. The ultimate success of the Microsoft antitrust action is not the sanctions imposed, but rather the abandonment by Microsoft of much of its anti-competitive behavior and the anti-competitive behavior that countless other companies will never commit due to the threat of similar action against them by the Justice Department.

It is worth remembering that the long antitrust suit in the 1970s against IBM was ultimately ended without severe sanctions. Some critics of antitrust point to that case as an example of the fruitlessness of antitrust enforcement, but they ignore the fact that the lawsuit itself forced IBM to back off from the worst of the predatory actions that led to the suit in the first place. It was partly to avoid further antitrust action that IBM allowed the personal computer industry and its "clone" rivals to get a foothold. Bill Gates' Microsoft would probably not have achieved its independent software position if the Justice Department had not pressured IBM to abandon its historic stranglehold on control of both software and hardware in its computers.

To see how similarly successful the Microsoft antitrust suit has been, we need to remember back to where the computer world was over three years ago when NetAction, followed by other consumer groups, began promoting antitrust sanctions against the company. That was a time when Apple was careening towards oblivion with Microsoft threatening to keep it around only as a secondary source for Office sales, while other Microsoft rivals were usually too frightened of Microsoft's power to say even a cross word about the company.

Now look at Apple; Steve Jobs deserves great credit for the company's revival, but he got breathing room when Microsoft backed off from its worst predatory actions. As testified to by Fred Anderson, the company's Chief Financial Officer, at the trial, Apple had been forced to make Explorer its default browser on threat of Microsoft discontinuing production of Office for the Mac. When Apple revealed its newest OS X, Jobs proudly outlined its inclusion of Sun's Java 2 technology - software that Microsoft had for years used its influence to try to undermine.

And then there is, of course, Linux and the open source alternative to Microsoft. The antitrust lawsuit without question gave the open source movement a three-year window to expand and build up the institutional commitments it needed to become a serious rival to Microsoft. Without the lawsuit, Microsoft would have used its market power to undermine open source and, given that danger, most other computer companies would have avoided commitments to open source projects for fear of betting money on a loser. That's not even speculation, since the infamous "Halloween Memo" leaked in 1998 from Microsoft offices outlined the danger Microsoft saw from open source and its plans to destroy it. The basic idea was the simple one Microsoft had used in its ever-expanding monopoly: manipulate computer standards that it already controlled and, in the words of the memo, "we can deny OSS (open source software) projects entry into the market."

Instead, by the end of the trial, Microsoft was holding up its failure to act on the Halloween Memo strategies and the consequent success of Linux as its best hope of avoiding breakup sanctions in Judge Jackson's courtroom. In the absence of Microsoft's monopolistic death sentence for open source, companies ranging from Caldera to IBM lined up to expand the software and networking support to make Linux and its companion projects a viable alternative.

In fact, Linux is such a strong alternative that Microsoft had to spend last month seeking to squelch rumors that its own Office software was secretly being ported to Linux. In the server market, Linux has passed Novell's Netware as the No. 2 platform with projects of 28% growth in the coming years. And for Web servers, Microsoft has lost the game to the open source Apache server which is installed for 63 percent of web sites and continues to see that number grow. While Microsoft has only seen a small erosion in its desktop monopoly, the recent agreement by IBM and other companies to support the GNOME desktop interface promises that Linux may give Microsoft a serious run for its money even in its most entrenched turf.

None of this is an argument for the Supreme Court to reverse Judge Jackson's breakup of Microsoft, since in the absence of those sanctions, Microsoft could still return to its earlier ways and such a strong sanction would be a salutary message to other potential monopolists not to abuse their market shares in anti-competitive ways. But the lesson is that in antitrust suits, the process and threat of sanctions themselves are often the best guarantee of a more open and innovative marketplace.

Nathan Newman is a long time community activist and technology analyst. His Ph.D., from the University of California at Berkeley, analyzed the social and economic effects of government technology policy around the Internet. He is currently pursuing a degree at Yale Law School. He can be contacted at .


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