DoJ: why Microsoft must be split

Conduct remedies argued as being inadequate

Analysis After some delay, the Department of Justice and the Plaintiff States have now released a Memorandum in support of the proposed final judgment being entered against Microsoft, together with five of six declarations from experts to support the plaintiffs' case. The Memorandum fills in gaps and provides the rationale in a useful way. It provides a solid basis for the proposed Final Judgment, and will make it difficult for it to be overturned on appeal. It could also save Judge Jackson a great deal of work, since if he chooses, he could now broadly go along with the winners' views, perhaps adding or subtracting a little here and there. All the indications are that he would have no qualms about ordering the breakup of Microsoft. The Memorandum points out that "the remedy for a violation of the antitrust laws should (1) prevent the continuation or recurrence of conduct found to be unlawful and (2) repair the damage to competition in the affected markets." Why breakup is needed The limits of conduct remedies are examined and it is found that they would require an excessive regulatory burden, and that they would not rectify the harm that had been done to the competition. It was decided not to ask for Microsoft to be split by creating two or more "operating system companies, each with access to the Windows operating systems (including successors now under development)". The alternative was a split by product group, with interwoven conduct remedies. Several times there's a hint of a joke, when the DoJ points out how the course of action that it proposes would increase Microsoft's "innovation" possibilities, but it's a joke that hard-core Microsofties will find hard to understand. One of the innovations made possible, the DoJ says, would be MS Office for Linux. With no Windows monopoly to protect, such a product would not be inconceivable, but its acceptance by any substantial numbers of present Linux users must be in considerable doubt. Then there's the jolly suggestion that MS Office could become an alternative platform, just as Microsoft was screaming was going to happen with Netscape Navigator and Java. The DoJ even spells out for Microsoft how this could be done: developers could be encouraged to write to Microsoft's fully-exposed APIs, and to make Office available for non-Microsoft platforms. With MS Office being dominant, the apps company could develop what in some ways might become a rival platform to Windows. More to it than manners A memorable paragraph states: "Microsoft's conduct past and present is not merely (as Mr. Ballmer would have it) .bad social graces'. Microsoft's conduct demonstrates its ability and intent to manipulate the boundaries and interrelationships between operating systems and applications for anticompetitive purposes. It is to eliminate the ability and incentive to engage in such conduct, and to restore competitive conditions, to which the proposed Final Judgment is directed. The DoJ calls on the court to use its "equitable powers" to make "the remedy... reasonably related to the wrong" and after some well-phrased argument that looks as though it is intended for the Supreme Court, concludes that "Microsoft succeeded in its objective and harmed both competition and consumers". The Memorandum moves on briskly to legal matters, and says that "Permanent injunctive relief ordered in a Sherman Act case must be both forward-looking and remedial. The decree must (i) end the violation, (ii) .avoid a recurrence of the violation and others like it and (iii) restore competition in the market." Furthermore, the injunctive relief must ensure that the defendant cannot benefit in the future from the harm to competition caused by its illegal conduct in the past... and "so far as practicable... denied future benefits from [its] forbidden conduct". Blocking the middleware threat The DoJ expresses concern that if Microsoft is not carved up and adequately constrained by conduct remedies, it could develop what the DoJ calls "middleware technologies", like voice recognition, media streaming and/or email software, using the same anticompetitive methods revealed at trial. MS Office could become a killer app, the DoJ suggests. Then there's middleware threats to servers. Finally, the DoJ mentions that with hand-held computers, "Microsoft is positioned to crush that threat to its operating system monopoly because those devices, like server-based middleware, need to be able to interoperate effectively with Microsoft's products, and Microsoft is able to prevent or hinder that interoperation." The Memorandum continues with a discussion of the reasonableness of the structural remedy, and how this would help consumers and ultimately not harm Microsoft's shareholders. What the DoJ omits to mention, is how much Microsoft's pride would be wounded by the split. ® Complete Register Trial coverage

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