There's No Choice: Dismember Microsoft
By Robert H. Bork. Mr. Bork, a former federal judge, is a senior fellow at the American Enterprise Institute. He has represented Netscape Corp. and currently is a consultant for ProComp, the Project to Promote Competition and Innovation in the Digital Age.
The first thing conservatives need to remember is that Bill Gates is not Elian Gonzalez. Nor are Microsoft's executives the counterparts of Elian's rescuer, clutching their browser to their bosoms as armed federal agents break in to snatch the code in the middle of the night.
Yet some of the most estimable conservative commentators teeter on the verge of hysteria over the government's case against Microsoft. They should pause for thought, learn the economics of antitrust and acknowledge that Joel Klein and his staff at the antitrust division of the Justice Department are honorable men who had a sound case, which they proved to the hilt before Judge Thomas Penfield Jackson, a fine jurist who was, incidentally, appointed to the bench by Ronald Reagan.
Proving multiple violations of the Sherman Antitrust Act was easy; the hard part will be devising a remedy for the damage Microsoft has done in monopolizing the market for personal-computer operating systems. There are only three choices for policy: leave the monopoly alone and hope for the best (e.g., a technological bypass of Windows), a court decree regulating Microsoft's conduct, or structural relief that promises the restoration of competition -- in other words, a breakup.
A breakup is what the Justice Department called for on Friday, and it is better than the other alternatives. Hoping for the best is not a policy; it is an abdication of responsibility. Regulation would be intrusive, error-prone, and endless. Does anyone want to do to the software industry what the Interstate Commerce Commission did for railroads and trucking? A body of necessarily complex regulation, moreover, would invite competitors to tie up and slow down Microsoft in endless litigation.
That leaves structural relief. Microsoft could be split into three companies, each able to lease or sell the Windows operating system. That would lead to competition, but, as each of the companies developed its own versions of Windows, the result, absent industry standards, might be balkanization, so that application writing would become more costly. The loss to consumers might well outweigh the gain.
A decree could divest Microsoft of its browser, Internet Explorer, which was a major implement in the maintenance of the operating system monopoly. Other companies could create browsers that, in time, would be capable of performing as platforms for applications and so render irrelevant which operating system underlay the browsers. The key objection is the phrase in time. Browsers might not become effective platforms for years, and the development of alternative operating systems could take additional time. This remedy might be equivalent to a policy of hoping for the best far into the foreseeable future.
But a divestiture of Microsoft's browser makes sense as part of the Justice Department's proposal to split Microsoft in two by making its applications division independent of the company owning the operating system. Under this plan, the applications company would have an incentive to write applications for other operating systems as well as for Windows and thus break the applications barrier to the emergence of new competition.
A possible difficulty is that both companies would occupy the same campus in Redmond, Wash., and old habits of cooperation might persist. On the other hand, dissolutions have sometimes uncovered animosities within the company being broken up. That, monetary incentives, a requirement that application program interfaces be disclosed to third parties and strong sanctions against collusion should do the trick.
The creation of separate applications and operating system companies has been criticized as having little connection to the case's concern with browsers. To the contrary, Microsoft's predation in the browser market was merely the most prominent of its efforts to preserve the applications barrier to competition with its operating system. The case centered on that barrier and the contemplated separation of applications and operating-system units would significantly weaken the barrier so that competition could break through.
The suggestion of a breakup, however sensible, will undoubtedly lead to a new round of hair pulling and teeth gnashing among conservatives. Some of them are adamant in their refusal to think that there can be any merit in the Microsoft litigation. They have Teflon brains; arguments simply slide off.
Granted, the Clinton Justice Department is the most corrupt in living memory. But many lawyers within the department are men of integrity, and that most assuredly includes Joel Klein and his staff. Mr. Klein is by no means an antitrust fanatic let loose upon the economy. In fact, he has been criticized for allegedly being too lax in merger enforcement.
Conservatives pride themselves on two loyalties: to the rule of law and to the free market. Microsoft threatens both. It is working assiduously for a political reversal of its legal loss. It is hard to walk through the Capitol without tripping over Microsoft's lobbyists or to read magazines and newspapers without finding vehement columns in its defense from public-interest groups, often with undisclosed financial support from the company. There is so much Microsoft money flowing through the system that the danger for nonpoliticized law is very real.
We should recall that when Mr. Reagan's antitrust chief, William Baxter, proposed to break up AT&T there was a similar conservative outcry and heavy political pressure to stop him. Conservatives proved wrong then, and they are wrong now. Political pressure to bend the law ought to enrage conservatives even more than the company's predatory tactics to stifle freedom in a crucial market. Let the remedy debate go forward dispassionately, carefully and thoughtfully.