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Microsoft: Did Judge Jackson Get It Right?

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From: George L. Priest
To: Jonathan ZittrainPosted Thursday, Dec. 2, 1999, at 3:30 AM ET

We do have a difference in view on the fundamental basis of antitrust law. The principles of antitrust law must be applied equally to firms regardless of size because the Supreme Court has adopted as the determining standard whether a practice benefits consumers. Benefit to consumers has nothing necessarily to do with the size of the firm. Thus, to use your phraseology, the law does state, "Companies with monopoly power are prohibited from" practices that harm consumers, just as "all companies are prohibited from" practices that harm consumers.

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We also have a difference on the question of multiple causation. By your view, many of Microsoft's practices that promote its products by benefiting consumers also hinder competitors. But the Supreme Court has stated again and again that the antitrust laws are designed to promote competition--which is to say, promote production that benefits consumers--not protect competitors. If Harvard Law School improves its faculty, all of its competitors might suffer as a result, but there is no violation of the antitrust laws, nor should there be.

I approve entirely, however, your standard of whether the challenged practices are ones that any firm can implement regardless of size. That was my earlier point. Various of the practices that Judge Jackson believes reinforce Microsoft's monopoly are exactly practices extremely common in industry, especially with respect to intellectual property. Mutual promotion agreements, agreements not to promote competing products, exclusive dealing agreements--the entire range of restrictive licensing terms--are routinely implemented by large firms and small. Indeed, it was the recognition that many small firms employ the same practices that led the antitrust academy and, later, the courts including the Supreme Court to re-examine the antitrust doctrines of the 1950s and 1960s, leading to adoption of the economic approach dominant today. Remember the GTE-Sylvania case in which Sylvania, by employing restrictive licenses seemingly more restrictive than Microsoft's, was found to have increased its market share from 2 percent to 5 percent. The only available conclusion was that the license restrictions created incentives for licensees to better promote the product, which is probably the effect of Microsoft's licensing restrictions as well.

What about remedies? I don't believe that Judge Jackson's findings will support any remedy other than, perhaps, some constraint on Microsoft's licensing terms unless the Court of Appeals and Supreme Court fully accept what is a set of highly debatable propositions:

1. that a browser that runs on an operating system is a competitor to an operating system;

2. that Microsoft's current 47 percent of the browser market (against Navigator's 48 percent) poses a dangerous probability of becoming 100 percent;

3. that the courts, including such highly intelligent jurists as Judge Jackson, will really be able to accurately make predictions of this nature about the development of the software market today and into the future;

4. that our legal system with its attendant processes of notice, filings, counter-filings, responses, judgment, and appeal of judgment, can operate faster and more effectively than real competition.

I could go on.

Finally, I believe that the reference of the dispute for mediation to Judge Posner--under whom I studied antitrust and who remains a close friend--is an unusual development, but one that cannot but contribute importantly to a resolution in the best interests of the country. It is unusual because Judge Jackson must know that Judge Posner's basic views are different from his own. But I admire Judge Jackson's statesmanship here. Although Judge Posner's role is only that of a mediator, the reference very much resembles the resolution of the Alcoa case now over 50 years ago. Alcoa remains the most important legal precedent for monopolization claims today. As you may remember, when Alcoa reached the Supreme Court, the court could not muster a quorum to decide the case. The court referred the case to a special appeals court panel headed by the legendary Judge Learned Hand. It is Hand's opinion in the case, not the Supreme Court's, that constitutes the controlling precedent on monopolization. Judge Jackson, thus, in Microsoft did exactly what the Supreme Court did in Alcoa: ask for help from the smartest court of appeals judge in the country. Again, Judge Posner is only a mediator; he has no authority to implement a resolution, except through his personal influence. But his influence is great because his abilities are great, and I am certain that a just resolution of this dispute, a resolution that benefits consumers, will result.

I have enjoyed our exchange. Perhaps we can resume when the Microsoft case reaches the next stage.