Microsoft monopoly muddle: no winner or loser

A prediction: there will be no winner or loser in the contest between Microsoft and the US Department of Justice, only a complex, often acrimonious struggle for a compromise that likely will benefit us all. Here's how I see it:

Half of US Assistant Attorney General Joel Klein's position is simple. He believes Microsoft has a monopoly in PC operating systems, and he knows there is a long legal history supporting the view that monopolists are subject to different rules and tougher standards than the average company.

However, deciding how to apply that thinking is another matter altogether. Anticompetitive behaviour is a lot like pornography. Most people think they know pornography when they see it, but trying to define it into law often proves impossible. Consequently, today's US antitrust laws are highly ambiguous and sometimes leave Microsoft in the unenviable position of not knowing whether a particular action, deal or decision will be deemed legal.

Author Ayn Rand had it right in 1962 when she described the plight of the businessman as follows: "If he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly - if he charges prices lower than those of his competitors, he can be prosecuted for unfair competition - and if he charges the same price, he can be prosecuted for collusion or conspiracy." In that environment, Klein's logic will inevitably sound fuzzy, but it will benefit from the powerful rhetoric of fairness.

In sharp contrast, Microsoft will point to such operating systems as Mac OS, OS/2, Unix and Linux as evidence that the company isn't a monopoly and therefore it should be treated like any other firm. From that position, Microsoft's lawyers will be able to show that no matter what the Justice Department might accuse the company of, other IT companies are doing virtually identical things.

But the "we're just like everybody else" defense also has its problems. There is, of course, the inconvenient fact that Microsoft has 95 per cent of the PC operating system business. But perhaps more important, America's instinctive distrust of Things Big will make it highly sceptical of Microsoft's power. Indeed, the very idea of US antitrust law emerged out of the checks and balances deeply ingrained in American culture. Consequently, to many people, Microsoft's arguments will sound clear but unacceptably Darwinian.

So fuzzy and fair are being pitted against clear and Darwinian. Given the choice, society would like its laws clear and its markets fair. Unfortunately, as noted, in the world of antitrust, that option doesn't exist. That's why the process almost certainly will be a muddle: a bit fuzzy, a bit clear, a bit fair, a bit Darwinian.

We've seen that pattern before. The US government always had a hard time explaining what exactly it wanted to do about IBM. But somehow - between the 1952 consent decree that barred IBM from the service bureau business, government jawboning that encouraged IBM to unbundle its software and endless suits and settlements that helped make it possible for competitors to build IBM-compatible processor, disk and tape equipment - a more level playing field was eventually built.

Odds are that a similar path awaits Microsoft. Don't expect any watershed decisions, just a steady series of agreements and pressures that restrain Microsoft's power without fundamentally hindering its ability to innovate and compete.

It won't be pretty, but history suggests that the results will benefit us all.

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David Moschella

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