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    Passing the torch on anti-trust law

    BY C. Boyden Gray
    08/17/2004
    by C. Boyden Gray on 8/17/04.

    Recently, the U.S. Court of Appeals ruled on Massachusetts vs. Microsoft — closing the last chapter in the antitrust battle running since 1998. In unanimously rejecting Massachusetts' call for tougher sanctions against the software giant, the appellate court essentially told Massachusetts to wake up and join the 21st century.
    Unfortunately, this is not the end of the story. While the U.S. courts may have put the issue to rest, the Europeans have recently taken up the torch, with the European Commission leveling charges against Microsoft that parallel the original case brought against the company in the United States. Rather than rehash the case, the Europeans should acknowledge the gains in consumer welfare competition has generated and reject new controls in the high-tech marketplace that could prove harmful to consumers.

    Massachusetts was the last American holdout in a case that had reached its end for all other government plaintiffs, including the U.S. Justice Department. In 2002, the U.S. District Court approved a settlement reached by Microsoft, Justice and nine other states. As a result of the 2002 ruling, Microsoft now operates under a broad set of restrictions intended not to manage competition in the software market, but to enable equal opportunity in the marketplace. At that time, the court also rejected calls for the tougher sanctions only Massachusetts continued to seek on appeal.
    The Massachusetts' appeal was based on the misguided assumption that weakening a strong company's market-leading product — in this case, the Windows operating system — would improve competition. The European decision applies this same logic, which ultimately is more concerned with protecting competitors rather than consumers. It must be noted that throughout this saga, there has been no evidence of consumer harm. Innovation has been brisk, prices fallen, and consumer choice has increased. Rather than disgruntled customers, it is competitors unsettled by the dynamic market who are pursuing these lawsuits. In essence, they hope to use the legal system to achieve what they could not in the marketplace.
    As with the American lawsuit, European antitrust officials have alleged Microsoft is taking advantage of its dominant position to unfairly bundle new products and capabilities into the Windows operating system. While the U.S. case focused on Internet Explorer, the Europeans claim the Windows Media Player is driving out rivals. The Europeans also echo claims Microsoft does not share enough technical information for rivals to develop products for the Windows operating system.
    In a sense, the European case is simply another bite at the apple for Microsoft rivals — especially given the Europeans brought the charges against Microsoft on behalf of a U.S. firm.
    In recent years, competition in various technology markets has been robust and consumers have been served well. AOL continues improving its online service, and RealNetworks continues enhancing its media player in response to competition from Microsoft and others. Sun Microsystems, IBM, and Novell all have had to provide better value to customers to compete in the market for server software used by businesses.
    The famed 20th-century jurist Learned Hand offered a stern warning to government and the courts when it comes to antitrust enforcement: "The successful competitor, having been urged to compete, must not be turned upon when he wins." Simply put, stronger competition delivers better results for consumers. Putting Microsoft on the sidelines of competition, as attempted by Massachusetts and now the Europeans, would hamper consumer choice and reduce innovation in many parts of the software industry.
    The rejection of the Massachusetts' appeal is good news for consumers — at least in the United States.The future of the software market, however, remains clouded by ongoing litigation in Europe and elsewhere.

    C. Boyden Gray, White House Counsel to President George Bush from 1989-1993, is co-chairman of the free-market advocacy organization FreedomWorks.