Law Technology

The Microsoft Case, Ten Years Later

By Ed Felten

Sunday was the tenth anniversary of the government filing its antitrust case against Microsoft. The date passed almost unnoticed, though echoes of the case continue to reverberate. This week I want to reflect on the case, with the benefit of ten years’ hindsight. I’ll write at least three posts: today, on the overall legacy of the case; Wednesday, on how the case affected the public view of Microsoft and software companies generally; and Friday, on how the government’s theory of the software market (which the courts accepted) looks in hindsight.

(Before starting, I should clarify that although I worked with the DoJ trial team through virtually the entire case — from before the case was filed, through the negotiation of the final settlement — I can’t say anything about what happened behind closed doors. My opinion is informed by everything I saw and heard, but unfortunately some of the most interesting details have to stay secret.)

Today I want to consider the overall legacy of the case. The purpose of antitrust law is to protect market competition, for the good of consumers. Thus Microsoft’s ultimate success in crushing Netscape and blunting the effect of Java only matters to the extent that it might have harmed consumers. The relevant questions are these: (1) Are the markets for operating systems and browsers healthier and more competitive than they would have been had the case not been brought? (2) Are consumers better off than they would have been had the case not been brought?

I see the case as a success by these standards, not so much because of the settlement, which most people saw as weak, but because the case taught Microsoft that ignoring antitrust concerns can be dangerous. Microsoft was routed in court and faced the possibility (though never the likelihood) of a court-ordered break-up; but the company managed to negotiate a favorable settlement when the government was distracted after the 9/11 attacks. Apparently worried that it might not be so lucky the next time, the company has moderated its behavior. It still dominates the operating system and browser markets — and it is still a fierce technical competitor, but its business and legal behavior is more moderate.

This kinder, gentler Microsoft is one of the two main legacies of the case. The other is the consensus that antitrust laws do in fact apply to high-tech companies. Though the law moves slowly — and sometimes can only deter via the possibility of after-the-fact sanctions — companies are not immune to its discipline just because they are in high-tech markets. Other powerful companies, such as Intel and Google, have learned this lesson too.

Tomorrow: how the case affected the public view of Microsoft and the software industry.

Full post as published by Freedom to Tinker on May 20, 2008 (boomark / email).