Microsoft decision at the Court of Appeals level shows that neither
complexity nor the deliberateness of judicial procedure precludes
effective Sherman Act enforcement in dynamic, high tech markets.
Coming scarcely three years after the filing of the complaint, this
thorough, convincing, full bench opinion provides a solid foundation
for settlement or, if that remains elusive, a lucid road map for party
presentations and trial court deliberations that should lead to a
decree restoring effective competition.
Microsoft scored some points: Divesture was
reversed, Judge Jackson was castigated and removed, and his
conclusions of both attempting to monopolize and of §1 tying in the
browser market were reversed. How-ever, the government prevailed in
very significant respects.
The detailed trial court findings were upheld in
their entirety because scrupulous review showed them to be justified
by the evidence and untainted by hint of bias. They remain in play on
all remand issues, including remedy.
Moreover, the full court upheld almost all of the
trial court rulings about unlawful monopolization of the PC operating
system market, a matter of critical importance to the state of
competition in software.
Microsoft's monopoly maintenance tactics, which
violated §2, included restrictive software licenses; exclusive
contracts with internet access providers; a product design that locked
Microsoft's browser (Explorer) into Windows by commingling software
supporting each functionality without any add/remove capacity; and
subverting Sun Microsystem's Java technologies to favor
Microsoft's Java version so that compatible applications would not
run on operating systems other than Windows.
Though not directly attacking other operating
systems, all these tactics helped to maintain the Windows monopoly by
handicapping both Netscape's browser and Sun's Java, two
"middleware" products with potential to ultimately erode that
The tendency of such tactics to bolster the
Windows monopoly can be illustrated with Netscape's browser. Because
Windows is the standard for PCs, most applications are written for it.
Comparatively few are available for competing operating systems. This
reinforces and protects the Windows monopoly by creating (an
applications barrier) to its erosion.
But Netscape's browser can sit on top of any
operating system and can also expose application program interfaces
(APIs) of its own. If it were to present enough of these, it could
make numerous applications available to any computer using its
browser, regardless of what operating system was installed. This would
neutralize the applications barrier. Therefore, Microsoft tactics that
stifle Netscape (or Java or any other middleware) protect the Windows
The circuit court's most provocative holding
dealt with tying. The district court, applying the analytically
enhanced per se rule that the Supreme Court majority has never
abandoned, held that by integrating Explorer into Windows, Microsoft
not only violated §2 (by protecting Windows), it also violated §1 by
stifling consumer choice in the browser market.
Concluding that the separate demand test
incorporated in the per se rule is a poor proxy for overall efficiency
of newly integrated products, the circuit court remanded for a rule of
reason analysis of harms and benefits.
Whether or not such a revision of tying doctrine
is thought to be warranted, the more significant facet of this holding
is what the court refused to do. Microsoft contended that courts
should never second-guess the purposes or effects of any software
design decision - that any integration of any previously separate
functionalities is per se lawful. The court first rejected this
"Gates principle" when it ruled that integrating Explorer into
Windows violated §2. It did so again when it remanded the §1 tying
claim for a fuller efficiency analysis.
The remand issues must now be disposed of.
Tactics violating §2 must be enjoined and Microsoft fenced in from
using similar tactics to target any other newer software products that
could expose their own APIs, or otherwise weaken Microsoft's control
of the operating system market.
The impact of this unanimous, full court decision
by this conservative court will impact the political climate for
settlement. Microsoft will probably emerge whole, but certainly not
unscathed. Serious constraints are appropriate and now seem
A. Sullivan practiced with Foley Hoag, a Boston firm, before teaching
for many years at Boalt Hall and since 1990 at South-western
University School of Law. A specialist in antitrust, he has authored
or co-authored two respected texts, a case book and numerous articles,
and has consulted for federal, state and foreign governmental agencies
and numerous law firms.