The New York Times
November 1, 1998
MARKET INSIGHT
In Microsoft Case, a Lot of Not Very Much
By KENNETH N. GILPIN
Moore's Law -- which holds that the speed of computing doubles every 18 months -- is a concept that is hopelessly alien to the practice of law.
The government's antitrust lawsuit against the Microsoft Corp. wound up its second week in federal district court in Washington on Friday, and the case, which was originally expected to be argued in a month's time, now looks as though it might drag on until close to Christmas.
Based on the stock market's response, it does not seem as though investors think the government has much of a case. Since the trial began, Microsoft's shares have actually risen slightly, closing at $105.875 Friday.
Still, the case remains a wild card for Microsoft's prospects. George L. Priest, the John M. Olin Professor of Law and Economics at Yale Law School, talked about the trial and what it means for business.
Q. You have no interest in the case beyond that of a well-informed bystander. What is your take on what has transpired thus far?
A. I don't think the Justice Department has shown much of anything yet in the Microsoft case. They have emphasized meetings and memos that are ambiguous at best. But nothing I have read rules out the possibility that the Internet Explorer and its integration into Microsoft Windows is a superior product for consumers than an unbundled browser, such as Netscape's Navigator. And that has to be the ultimate standard: What is the impact on consumers? How are consumers worse off?
Q. It seems the Justice Department is bringing an antitrust case in an industry whose lifeblood is speed. Even if the government wins its case, isn't there a risk that competitive conditions in the business will be far different once a remedy is proposed than they were when the case was brought?
A. The case will be obsolete by the time it is settled unless the judge rules for the government and slaps some kind of injunction on Microsoft. That would be unfortunate for consumers, the economy and the world.
One of the problems is that most of our antitrust law has been developed in the context of manufacturing, where if a firm has a very large market share we know it will take a long time to erode, because of the costs of getting into the market.
But this is not U.S. Steel, whose monopoly took 30 years to erode. This is an industry where market share can be overturned in a very short period.
Q. What sort of remedy do you think might be imposed if the government wins?
A. If the judge puts a limitation on the Microsoft browser, and tells them to unbundle it, that is not so important. It is not a clear gain for consumers, but it will not dramatically affect the industry.
As it is, anyone with the mildest level of computer sophistication can download Netscape's Navigator within a matter of minutes. It can't be an important restraint of trade to exclude Navigator when you can get it off the Internet that quickly.
Q. What if the court ordered a breakup of Microsoft?
A. I don't think Microsoft can be broken up. This is not a company with different plants. What are you going to do, put partitions in the halls of Microsoft's headquarters in Redmond, Wash.? The notion of breaking up Microsoft is lunacy.
Q. Still, might a victory over Microsoft embolden the government to take on other high-technology companies?
A. I don't think the industry will be thrown into a tizzy if Microsoft loses, if only because Justice does not have the prosecutorial resources to bring massive numbers of suits.
This is not like the 1960s and 1970s, when the Warren Court began issuing decisions that effectively agreed with everything Justice brought before them. That type of authority did have a substantial impact on all industrial development in the United States, and it was only in the 1980s and 1990s that that sort of thrust has been reversed. I don't think that is going to happen here.
Q. The Microsoft case is capturing the headlines, but the government recently brought an antitrust suit against Mastercard and Visa. Is this the start of a new period of activism by Justice in antitrust?
A. I don't know why Justice has gotten more active. It is unfortunate that it seems more activist on the behalf of individual firms that at the moment are not doing as well as their competitors in the marketplace, be they American Express in the Mastercard/Visa case or Netscape Communications in the Microsoft action.
I am a strong supporter of antitrust law, as a general matter. But given the increased level of competition in the world, we are going to need fewer antitrust cases.
Monopolization will become less relevant because of the possibilities of entry into a given market. We have fewer trade restrictions now, and that allows foreign companies to enter and compete if there is even a threat of dominance.