Document Type

Article

Publication Date

Spring 2001

Abstract

According to Judge Thomas Penfield Jackson, Microsoft was a “predacious” monopolizer that did extensive “violence . . . to the competitive process.” Through a “single, well-coordinated course” of anticompetitive action, it suppressed competition from Netscape's Navigator, an Internet browser, and from Sun's Java programming language and related technologies. Microsoft “mounted a deliberate assault upon entrepreneurial efforts, . . . placed an oppressive thumb on the scale of competitive fortune, . . . and trammeled the competitive process.” Having colorfully concluded that Microsoft's offenses were extreme, Judge Jackson deferred to the government's demand for a drastic remedy. He ordered that Microsoft be broken into two firms: one confined to the operating systems business, and the other to the applications business. He also imposed a set of conduct restrictions, some applying to both firms, which remain in effect for the ten-year duration of the judgment, and some applying primarily to the operating systems business, which remain in effect until the two businesses establish their independent viability. The Supreme Court refused expedited review of the district court's decision and remanded the case to the Court of Appeals for the District of Columbia Circuit, where it is now pending.

This Article attempts to identify an appropriate legal response to the offenses Microsoft was found to have committed. The ultimate criterion of the appropriateness of a remedy is straightforward: a remedy should serve consumers. Such a remedy will result in markets that closely resemble those that would have emerged but for Microsoft's unlawful behavior. The optimal remedy will minimize the sum of the expected costs of future misconduct, anticompetitive effects of past misconduct, lost efficiencies in product composition, firm structure, and multi-firm collaboration, impaired incentives to innovate, and administration, including enforcement of the remedy and the antitrust laws. Judged by this standard, the court's decree falls short.

Part I begins by setting forth in some detail the conduct the court held illegal. Although we disagree with many of the court's factual and legal characterizations of Microsoft's conduct, we generally accept them for purposes of analyzing the remedy. Part I then sets out briefly the terms of the court's remedial order. Part II, after a description of the conditions that might justify structural relief, presents the argument that structural relief is inappropriate in Microsoft. This Part concludes that any severe restructuring of Microsoft, including the separation of its applications and operating systems activities ordered by the court, will almost certainly raise prices to consumers and will likely fail to produce long-term competitive benefits. Part III sketches the content of a conduct remedy tailored to promote consumer interests and identifies a number of ways in which the decree's conduct provisions subvert that objective.

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