Fatal System Error?

Microsoft antitrust decision a positive step in freeing industry

On Nov. 5, U.S. District Judge Thomas Penfield Jackson delivered a blow to the Microsoft Corporation in the form of a 207-page finding of fact. Jackson concluded that since the early '90s, Microsoft has stifled innovation, reduced competition and hurt consumers. Although not a final verdict in the nearly year-long antitrust case filed by the U.S. government--that will be delivered within a few weeks unless the parties negotiate a settlement--the findings clearly side with the government by declaring Microsoft a monopoly in the operating systems market and rebuking all of Microsoft's claims to the contrary.

The judgment is a victory for consumers and a benchmark of judicial efficiency.

Microsoft has undeniably been an innovative force in the technology industry. However, the question posed by this trial was not whether Microsoft fostered innovation within its own company, but whether it deliberately pursued policies that stifled innovation by potential competitors. The answer to the latter question, according to Jackson, is yes.

The trial included substantial evidence that Microsoft used strong-arm tactics to discourage its competitors from developing software that would rival Microsoft's own products, attempted to collude with Netscape in order to divide the market for Web browsers, linked products to force consumers to purchase both its operating system and its Web browser and gave preferential treatment to companies that pre-installed Microsoft's Internet Explorer on their computers.

The detrimental effects of these policies are twofold. Ninety percent of Intel-based personal computers now come with Windows pre-installed, giving Microsoft effective control over the course of technological development in the software industry. Furthermore, the fact that Microsoft has discouraged innovation from its competitors has undoubtedly curbed the introduction of new products onto the technological market.

While Jackson's findings might yield short-term losses for shareholders, the long term effects of the decision are potentially beneficial to investors. Some analysts predict that if the court were to force the breakup of Microsoft into several smaller companies, its overall shareholder value could actually increase.

The Microsoft trial was an exemplary case of efficiency. Thanks to Jackson's command of his courtroom, the Microsoft case was argued in just under a year. By comparison, arguments for some trials of similar scope have taken well over a decade.

Jackson's unprecedented and welcome decision to issue his findings of fact before the final verdict may shorten the trial and avoid the unnecessary expenditure of taxpayer dollars on a lengthy appeals process. Because both parties in the case know where they stand before the verdict has been issued, they are able to make an informed decision about whether and on what terms to settle the case.

If the parties can settle, they will not only avoid the costly and arduous process of appeals but may also avert the possibility of a new, and possibly ideologically different, administration assuming control of the government's side of the case should it continue past the 2000 presidential election. Microsoft's political lobbying efforts have intensified over the past year, and it would be disappointing to see the judicial process interrupted by politics.

Monopoly power isn't good for the American people, and Jackson's findings are a welcome step to eliminating the Microsoft monopoly.