IBM, the poor dear, was being bullied. Microsoft, according to an IBM official who testified at the antitrust trial, said it would deny IBM a license to use Microsoft's Windows operating system unless IBM agreed not to promote products that compete with various Microsoft products.
IBM refused to make that concession. And got the license anyway. Being a monopoly does not seem to be as much fun as it was in Standard Oil's salad days.
Two branches of the federal government, which is a case study in institutional sclerosis, are lecturing Microsoft on the virtues and modalities of innovation, but at least President Clinton's Justice Department, which sometimes resembles a torpid lion sunning itself after dining on a succulent missionary, has at last found a violation of law sufficient to bestir it. Still, is it churlish to wonder, pianissimo, if there really is such a thing as antitrust law?
A threshold question about something purporting to be a body of law is: Does it give due notice of what behavior is and is not permissible? Maybe antitrust law does.
However, it was shaped by conflicts over railroading, with its huge entry costs, and an oil company, which stretched from oil fields to refineries to transportation to gas pumps, enjoying monopolistic market share. Is antitrust law, and the creaking machinery of litigation, sufficiently nuanced and supple to define and deal with anticompetitive practices in fluid high-tech industries characterized by high-velocity change?
In his finding of facts, Judge Thomas Penfield Jackson said some things mystifying to the minority of Americans who are not lawyers. For example:
"A Microsoft study from November 1997 reveals that the company could have charged $49 for an upgrade to Windows 98 -- there is no reason to believe that the $49 price would have been unprofitable -- but the study identifies $89 as the revenue-maximizing price. Microsoft thus opted for the higher price."
Now, Jackson does not intimate that maximizing revenues is intrinsically illegal, or that there is a legal obligation to set prices just high enough to be not unprofitable. But: If profits were maximized at $89, presumably a $99 price would have dampened demand. Which means the monopoly was constrained by market forces.
That does not disprove monopoly power: A turn-of-the-century oil monopoly holding consumers at its mercy was a monopoly even though there was some price that would have radically suppressed demand for its products. Still, Jackson's citing of Microsoft's $89 price cries out for exegesis: How elastic was demand for the Windows 98 upgrade? If Jackson knows, how does he know? On the basis of what assessment of consumer preferences and alternatives?
Attorney General Janet Reno says Microsoft's behavior has had the effect of "impairing the ability of Microsoft's competitors to obtain financing for research and development." Given the giddy heights to which investors have driven the valuation of innumerable high-tech companies, many of them quite new, it will be interesting to see how the court comes to a conclusion about how much better things would be for consumers but for Microsoft's putative impairment of investment in its competitors.
Joel Klein, assistant attorney general for antitrust, says the government will seek "serious remedial redress" for "harm to innovation" because "products that would have come to market were impaired." It will be fascinating to see to what extent this involves Jackson in judicial clairvoyance, postulating harms -- perhaps correctly, but certainly problematically -- resulting from the nonexistence of hypothetical products.
Still, Microsoft has a large incentive to settle before the next stage, at which it probably will be formally branded a monopoly. Then the 20 state attorneys general -- speaking of predators -- who have formally joined the government's suit would pounce. They may be perfectly public-spirited, but as was said of W. C. Fields, "He had the greatest reverence for his colleagues, with the usual reservations and suspicions."
Microsoft's ten-thumbed efforts at self-defense, including its lobbying to cut the funding of the Justice Department's antitrust division, puts one in mind of H. L. Mencken: "The older I get the more I admire and crave competence, just simple competence, in any field from adultery to zoology." But the damage Microsoft can do, to itself or the economy, pales in comparison with the damage government can do trying to lasso the whippet of high-tech industry with a lariat woven of laws from an era long before the perpetual hurricane of creative destruction began howling through an industry that may be subject to a series of highly perishable supremacies.