February 19, 2018

The Microsoft Case, Ten Years Later

Sunday was the tenth anniversary of the government filing its antitrust case against Microsoft. The date passed almost unnoticed, though echoes of the case continue to reverberate. This week I want to reflect on the case, with the benefit of ten years’ hindsight. I’ll write at least three posts: today, on the overall legacy of the case; Wednesday, on how the case affected the public view of Microsoft and software companies generally; and Friday, on how the government’s theory of the software market (which the courts accepted) looks in hindsight.

(Before starting, I should clarify that although I worked with the DoJ trial team through virtually the entire case – from before the case was filed, through the negotiation of the final settlement – I can’t say anything about what happened behind closed doors. My opinion is informed by everything I saw and heard, but unfortunately some of the most interesting details have to stay secret.)

Today I want to consider the overall legacy of the case. The purpose of antitrust law is to protect market competition, for the good of consumers. Thus Microsoft’s ultimate success in crushing Netscape and blunting the effect of Java only matters to the extent that it might have harmed consumers. The relevant questions are these: (1) Are the markets for operating systems and browsers healthier and more competitive than they would have been had the case not been brought? (2) Are consumers better off than they would have been had the case not been brought?

I see the case as a success by these standards, not so much because of the settlement, which most people saw as weak, but because the case taught Microsoft that ignoring antitrust concerns can be dangerous. Microsoft was routed in court and faced the possibility (though never the likelihood) of a court-ordered break-up; but the company managed to negotiate a favorable settlement when the government was distracted after the 9/11 attacks. Apparently worried that it might not be so lucky the next time, the company has moderated its behavior. It still dominates the operating system and browser markets – and it is still a fierce technical competitor, but its business and legal behavior is more moderate.

This kinder, gentler Microsoft is one of the two main legacies of the case. The other is the consensus that antitrust laws do in fact apply to high-tech companies. Though the law moves slowly – and sometimes can only deter via the possibility of after-the-fact sanctions – companies are not immune to its discipline just because they are in high-tech markets. Other powerful companies, such as Intel and Google, have learned this lesson too.

Tomorrow: how the case affected the public view of Microsoft and the software industry.

Comments

  1. Clint Olson says:

    I call bull.

    Microsoft has repeatedly shown by their actions in the recent EU antitrust cases that they decidedly don’t think that “ignoring antitrust concerns can be dangerous”. They have consistently done the very least to comply that they could get away with, if that, and have eaten up the fines the EU hands out in response like candy.

    I would also argue that the “fierce technical competitor” claim is misleading — another evidence of Microsoft’s disdain for antitrust laws is its approach to innovation. The team working on Internet Explorer quite obviously saw no need to improve their product in any meaningful way until a viable competitor (Firefox, of course) entered the market. It was much the same with Vista… Windows didn’t get a 3D-rendered interface until both OSX and Linux (via Compiz) started wooing users with their own shiny eye-candy.

    All that being said, I’m still looking forward to Ed’s take on the public’s perception of Microsoft.

    Clint

  2. > technical competitor, but its business and legal behavior is more moderate.

    You didn’t pay much attention to the widespread process abuse through which OOXML was approved as ISO standard, did you?

  3. David H says:

    You’ve got to be smoking something. A “kinder, gentler Microsoft”? Is that the Microsoft that bought off and corrupted ISO? The Microsoft that invested in SCO’s anti-Linux crusade by buying useless licenses and coaxing Baystar to invest directly? The Microsoft that debased Kerberos? The Microsoft that halted Intel’s video codec development by threatening to make Windows incompatible with Itanium? That kinder, gentler Microsoft?

    There is no such thing as a kinder, gentler Microsoft. They are toxic in every way, a corrupt parasite in the world of computing. The only sensible approach to dealing with them is to follow Nancy Reagan’s advice: “Just say No.”

  4. Eric Johnson says:

    Hmmm – some of the above comments, harsh language aside, highlight for me some of the evidence that runs contrary to any argument that the market is more robust because of the lawsuit. To me, the evidence of competition in a variety of markets – OS, web servers, etc., is quite revealing in that the only viable competition to Microsoft’s offerings happens to be with open-source, or open source-based competitors.

    Ten years ago, business models around pure open-source offerings were only a glimmer in a few people’s eyes, and I don’t think the anti-trust settlement in any way enabled their success. Rather, the success of open-source came about in part due to the inability to sue over software patents until the late 90s, and all the large commercial players in the market ignoring open source until it happened to cross a critical threshold where it can no longer be held back.

    To some degree, even Google owes some of its extraordinary success to its ability to scale using a customized version of Linux. If they had to build out their infrastructure on top of Windows, they would not have been able to scale as quickly.

    If any regulatory agency has had an effect, it has been the EU, not the US. The EU has at least forced Microsoft to document protocols for the SAMBA team, although even that took years to drag out of them.

  5. Remember, we’re not comparing the current state against an ideal world. We’re comparing against a world in which the antitrust suit was never brought.

  6. billy bathgates says:

    David H states it quite well.

    bill gates is a poisonous individual whose pathological obsession with the control and ownership of everything IT related has deeply damaged many aspects of computing.

  7. Anonymous Coward says:

    >> technical competitor, but its business and legal behavior is more moderate.
    >
    > You didn’t pay much attention to the widespread process abuse through which
    > OOXML was approved as ISO standard, did you?

    10 years ago, MS would have threatened everybody with economic retaliation (cutting off OEMs who shipped a competing product, etc.). Now they realize they can’t simply ignore the law — they have to play the game. And now they play the game very skillfully. I’ll leave for others to decide whether that’s an improvement.

  8. billswift says:

    Open Source is minor competition at best. See Marcus Ranum’s editorial “Who Needs an Enemy When You Can Divide And Conquer Yourself?” for an analysis of how the variety of Linux distros is recreating the UNIX wars that let Microsoft grow so ridiculously in the late 80s and early 90s.

  9. olivier says:

    If you want to “compare against a world in which the antitrust suit was never brought”, how will you be able to isolate the effect of the U.S. antitrust case from the European antitrust case? Karel Van Miert, former European Commissioner, recently said during a speech that the only reason why the EU antitrust case went forward was because of the weakness (his words) of the American settlement. He also expressed amazement at the speed with which the court case was settled in the first year of the Bush presidency.