posted by John O'Sullivan on Mon 17th Nov 2003 00:01 UTC
IconThere's been a bunch of news recently about Microsoft's continuing anti-trust problems. There were arguments in Massachusetts' appeal of the consent decree between MS and the Department of Justice. Also, three days of hearings occurred this week in the European Union's investigation of MS conduct in Europe. Nothing definitive happened, but there are some intriguing bits and pieces that surfaced.

Editorial Notice: All opinions are those of the author and not necessarily those of

The US hearing was for Massachusetts' appeal of Judge Kollar-Kotelly 's approval of the DOJ/MS settlement. Massachusetts says the settlement is too light and fails to deprive Microsoft of their ill-gotten gains. Normally, I'd say their chances of winning this appeal were between slim and none. If the DOJ and the lower court are OK with the deal and feel it's a valid expression of the appeal court's earlier ruling, then that's that. But Massachusetts has two things going in their favor. First, Microsoft is demonstrably still enjoying the fruits of its crimes. They have been forced to give up nothing, and they're still fighting over Java. Also, Kollar-Kotelly and the DOJ are on record recently as expressing concern over Microsoft's adherence to the consent decree. The proximate cause of their concern being the pitiful take-up rate on company's wanting to look at Microsoft APIs. These two points could be argued to show Microsoft is not taking the settlement seriously. If the judges buy that argument, then all bets are off. Because then it would be a turf issue. Does Microsoft's behavior amount to contempt of court? I wouldn't want to be the MS attorney for that hearing.

But that's still a long shot. A more likely (but still low-odds) result would be for the appeals court to add a few things to the consent decree. That would save face all around for the Federal courts. Rather than a rebuke of Kollar-Kotelly , it could be taken as a reinforcement of her orders. An expansion based not on her errors, but on Microsoft's failure to fully comply. No new precedents, no nasty overturning of lower rulings, no basis for further appeal.

If the appeals court ruled that way, and its a big if, what would they order? We can forget anything that would substantially re-mold the market. No new break-up order, for example. But they could rule narrowly on the basis of denying Microsoft the fruits of their crimes that some source code might need to be opened. Say Internet Explorer and some APIs. They could rule that MS must carry Java. But since that's the subject of separate proceedings, I wouldn't count on it.

If (there's a lot of ifs here) they did order the source code to IE be opened, MS would immediately argue they were being deprived of property without due process, unreasonable search and seizure, etc. But that wouldn't get them anywhere. The Federal courts have no problem with the government confiscating property when that property was related to illegal activities. Boats, cars, houses, bank accounts, jewelry, you name it and the US government has seized it as part of drug investigations. They wouldn't need to set a precedent here in order to make such a ruling. The thinking would be, Microsoft can't argue they're being deprived of a valuable asset since the only reason the asset is valuable is because of their illegal behavior.

Microsoft's lawyer, Michael Lacovara may have undermined his own case by arguing that the damage to Netscape could not be quantified. According the Washington Post, he "insisted that no one had proved that the software giant's acts led to Netscape's share of the market falling from nearly 85 percent to its current 5 percent." Hmmmm. I guess that means if nobody can find the body, there must have been no murder. Realistically, nobody has to prove such a causal link. The fact that MS profited and Netscape suffered because of conduct this court has already held to be illegal is sufficient. The undermining part comes from the "85 percent" argument. If the exact fruits cannot be quantified, then a more general remedy is called for. Had Lacovara said, yes we were responsible for this, and we're sorry and we'll make restitutions, MS would be off the hook. Its hard to imagine that any court would impose restitutions high enough to make a significant dent in Microsoft's pile 'o money. I think Ballmer would be delighted to turn this into a problem that he could just throw money at. But a more general remedy could pose significant business risks in the future.

Its always a mistake to read too much into the questions the justices ask during oral arguments. But you can sometimes determine the general direction of their thinking. For example, if all the questions are about the First Amendment, its unlikely they are going to decide the case based on the Fifth. In this case they were predictably scornful of Massachusetts dragging the rotting corpse back into their courtroom. On the other hand, some of the questions clearly showed that they understand the "ill-gotten gains" argument. There is no way to tell if they agree or disagree with the argument, but they certainly recognize that its an argument they must deal with one way or another.

Table of contents
  1. "Anti-Trust Action Aplenty, Page 1"
  2. "Anti-Trust Action Aplenty, Page 2"
e p (0)    91 Comment(s)

Technology White Papers

See More