Judge Jackson strikes out with Microsoft Ruling

Dear Member of Congress:

Yesterday, the presiding judge in the government’s antitrust lawsuit against Microsoft Corporation issued his “conclusions of law” opinion. Regrettably, U.S. District Judge Thomas Penfield Jackson paints a picture of Microsoft that is far from reality. Labeling the company a monopoly in an absurdly narrow marketplace, he has written that Microsoft “maintained its monopoly power by anti-competitive means” and attempted to monopolize the Web browser market in violation of Section 2 of the Sherman Antitrust Act. The judge also ruled that Microsoft violated Section 1 of the law by “unlawfully tying its Web browser to its operating system” and stated that the company could be sued under state anti-competition laws. In doing so, Judge Jackson has both failed to account for the breadth of today’s technology marketplace and betrayed his ignorance of key facts about its competitive nature.

Assistant Attorney General Joel Klein chillingly stated that this decision “sets the ground rules for enforcement in the information age.” This and future antitrust enforcement in the technology sector will undoubtedly stall the astounding pace of innovation, raise costs for consumers and threaten America’s lead position in the world’s technology marketplace.

In reality, Microsoft’s supposedly anti-competitive behavior is the lawful byproduct of the most competitive marketplace in the world. The government’s actions through this case threaten to limit competition in that marketplace and the innovation and consumer benefits that come from it. Microsoft’s browser software, Internet Explorer, was deemed superior to Netscape Navigator under independent review. Even America Online twice chose Microsoft’s browser over Netscape’s. In fact, America Online’s second decision in favor of Microsoft’s browser occurred after it had acquired Netscape for nearly $10 billion dollars. The government needs look no further than America Online if they seek to understand Netscape’s demise.

At its heart, the case is based on the notion that the government can predict and should manage what computer and software technology will look like in the future. By preventing Microsoft’s Windows operating system from including an Internet browser, the government establishes a precedent that limits the ability of all software makers to determine how software products will best utilize the latest technology to meet consumers’ needs. By ruling that Microsoft unlawfully tied its browser to its operating system, Judge Jackson has ignored an appellate court ruling from June of 1998 that found the exact practice in question – the integration of Windows and the Internet browser – to be beneficial to consumers and perfectly legal.

The government’s actions also promise to unleash a flood of frivolous class-action lawsuits filed by trial lawyers who seek to cash-in on the judge’s ruling under the guise of consumer interests. The threat of these lawsuits will drive entrepreneurs and investment from the technology sector.

Citizens for a Sound Economy has taken a steadfast position throughout the successive stages of the trial opposing the government’s antitrust lawsuit against Microsoft. Government involvement in the technology sector will not be good for the American consumer– as witnessed by yesterday’s record 349.15 point drop in the Nasdaq. Federal regulators cannot second-guess or forecast a market as dynamic as the software industry. Requiring Microsoft, or any other software company, to check with government bureaucrats before it can release a new product or breaking the company up into pieces will slow innovation and harm consumers.

CSE believes the government should neither determine how products are made available in the software marketplace nor what features they offer consumers. Consumers can and should decide for themselves whether a particular product is useful and worth the price being asked for it.

The government’s case is more about corporate welfare than protecting consumers. This lawsuit is the result of Microsoft’s competitors traveling to Washington to lobby the government to get what they were unable to get in the marketplace – protection from tough competition from a successful rival. That Microsoft’s competitors hailed the Judge’s opinion at the same time the market rejected it is clear evidence that they are acting in their own best interest.

Through this lawsuit, the government is asserting control over the technology marketplace and this will invariably limit choices and punish innovation. Ultimately, the message sent to innovators and entrepreneurs by this lawsuit is that prosecution is the reward for providing a new product at a lower price than your competitors. CSE believes this is both a policy for failure and the true cause of consumer harm.


Erick R. Gustafson Director of Technology and Communications Policy Citizens for a Sound Economy