MICHAEL GEIST
Friday, June 29, 2001
When the U.S. Justice Department launched its current battle against Microsoft Corp. four years ago, it did so with the conviction that the competitive landscape of the Internet was at stake. Although Microsoft and its allies are characterizing yesterday's appellate court decision as a convincing victory and a sign that it is time to put this case to rest, the competitive concerns remain as relevant today as in 1997.
Once the Justice Department succeeded in proving that Microsoft enjoyed a monopoly position in personal computer operating systems, the case boiled down to one crucial question -- did Microsoft use that monopoly power to behave in an uncompetitive manner?
Following a lengthy trial, Judge Thomas Penfield Jackson found that it did. After a brief remedies hearing, the judge ordered Microsoft to be split up.
That is not all Judge Jackson did. He also conducted secret interviews with members of the press and made numerous derogatory comments about Microsoft officials outside of the courtroom.
Left with a judge who appeared plainly biased against Microsoft, the appellate court had little choice but to vacate the judge's order and to send the case back to the trial level with a new judge presiding over the matter.
Assuming for the moment that the Justice Department does not appeal this decision to the Supreme Court, it is noteworthy that the new judge will not start with a clean slate. Although Microsoft based its appeal on both Judge Jackson's conduct and his legal findings, it won primarily on the conduct grounds.
A careful review of yesterday's decision reveals that the appellate court agreed with Judge Jackson on many of the substantive questions at the heart of the trial.
Did Microsoft enjoy monopoly power in the PC operating system market? Both courts say yes. Did Microsoft use that power to take advantage of its licence restrictions with computer manufacturers to protect its monopoly in an illegal manner? Both courts say yes. Did Microsoft use that power to enter into exclusive contracts with Internet access providers in an illegal manner? Both courts say yes. Did Microsoft use that power to threaten Intel and Apple Computer in an illegal manner? Both courts say yes.
As both sides consider their next move, the pressure to quickly settle the case will increase. President George W. Bush has always been unsympathetic to these kinds of lawsuits, while the leadership at the Justice Department has changed along with the change in administration.
Even the appellate court's decision cast some doubt on the viability of this case in light of the ever-changing technological landscape. The court noted that the six years that have passed since Microsoft engaged in the alleged anticompetitive behaviour is an "eternity in the computer industry." The court expressed its concern that "by the time a court can assess liability, firms, products, and the marketplace are likely to have changed dramatically."
While the products have indeed changed dramatically -- the concern over Web browsers seems irrelevant today -- the marketplace has not. Rather than battling over browsers, Microsoft is today using its same dominant position on other fronts.
The company has engaged in a loud, public battle with AOL Time Warner over the use of Windows XP, its next version of the Windows operating system. Central to that battle has been the integration of instant messaging services and media players into the operating system. As evidence that little has changed, one Microsoft proposal apparently included a condition that would have prevented AOL subscribers from using RealPlayer software in Windows XP.
Microsoft's plans to include Smart Tags in Windows XP, which would have created new, Microsoft-generated links on third-party Web pages, were shelved on Wednesday after the public outcry against the feature became too great to ignore. The objection stemmed from the fear that Smart Tags would create links to Microsoft Web properties without consent. For example, this column would undoubtedly feature links to the Microsoft sites where the word Microsoft appears, but links to Intel, Apple and RealPlayer would have been less likely.
While these activities may not be relevant for the new trial judge, they should factor into the analysis as the Justice Department considers whether and how it will pursue this case. The technology and many of the chief personalities in the Microsoft case may have changed, but the core principle has not. The competitive landscape of the Internet is still at stake.
Michael Geist is a law professor at the University of Ottawa Law School and director of e-commerce law at the law firm Goodmans LLP.
mgeist@uottawa.ca
