It was a jarring juxtaposition. As George W. Bush's administration decided last week to abandon the government's plan to break up Microsoft for a raft of antitrust violations, Bill Gates, the company's co-founder and chairman, was saying that the case had had no impact over the way the company designed its products or conducted its affairs.
"There's been no interference from the lawsuit in terms of Microsoft pushing its innovation forward," Gates told The Washington Post. "I doubt there will be that interference because the laws do and should encourage innovation."
Indeed, the company is preparing to launch a new operating system that includes the kinds of features that have been at issue in the antitrust case.
The Justice Department's retrenchment seems to epitomize the Bush administration's belief that government should not play a decisive role in business affairs, and that, by and large, market forces should dictate how companies compete.
This conviction could also be seen in the administration's recently announced intention to relax or eliminate a host of decades-old regulations that have prevented the nation's largest broadcasters, cable companies and media conglomerates from growing bigger. The rules have kept conglomerates like AOL-Time Warner from owning a television network, and big newspaper chains and cable companies from also owning local broadcasting stations.
Until last Thursday, the Justice Department and most of the 18 states involved in the latest round of litigation had concluded that a consent decree limiting Microsoft's conduct would never be enough to restore competition to the software market.
Anti-competitive
They saw Microsoft as an antitrust recidivist, an aggressive monopolist that two federal courts had said had bullied its rivals and abused its monopoly position in the industry. Indeed, Microsoft spent years developing its new operating system, Windows XP, which some antitrust experts say poses even more anti-competitive problems than the older systems at the center of the lawsuit. In addition to bolting in the latest version of Microsoft's Internet Explorer, Windows XP also integrates applications for processing digital photographs, instant messaging, and video and audio players.
Nonetheless, a Republican administration that never really cared for the break-up order, and a president who has voiced impatience over protracted lawsuits, have decided on a more conciliatory course of action.
Senior officials say that by narrowing the case and dropping the break-up request, they will shave many months off the proceedings. And they add that they are only following the guidance of a unanimous appeals court that three months ago voiced skepticism about any breakup order.
To some who have followed the Dickensian twists and turns of the long-running case, events last week seemed eerily familiar.
Six years ago, US District Judge Stanley Sporkin rejected a consent decree filed by the Justice Department and Microsoft, finding that it wouldn't work.
"The picture that emerges from these proceedings," Sporkin wrote in his opinion in 1995, "is that the US government is either incapable or unwilling to deal effectively with a potential threat to this nation's economic well-being."
If he were to approve the deal, he wrote, "the message will be that Microsoft is so powerful that neither the market nor the government is capable of dealing with all of its monopolistic practices."
Accepting the proposed consent decree, the judge concluded, "would almost be the equivalent of a court accepting a probationary plea from a defendant who has told the court he will go out and again engage in inappropriate conduct."
The government and the company responded by getting Sporkin thrown off the case and found a new judge to approve the decree, which, indeed, proved ineffective.
"Microsoft has flaunted conduct remedies for years," said Mark N. Cooper, research director of the Consumer Federation of America. "The decision to take a structural remedy off the table puts the Department of Justice and the state attorneys general in the position of having to fashion an extremely aggressive set of behavioral controls that will have to be followed up vigorously."
Some antitrust experts and some state officials wonder whether, in fact, it will prove possible to curb a pervasive corporate culture through a consent decree. In any case, it will require years of close and onerous supervision by the judiciary and law enforcement, an outcome the Clinton administration and the states rejected last year in favor of a break-up.
"Judge Jackson repeatedly made clear that he did not want to be another Harold Greene," said Stephen D. Houk, a lawyer who has represented the states in the Microsoft case, referring to the judge who spent more than a decade supervising every facet of operations of AT&T after its complex consent decree was approved.
"There are problems with the large obstinate corporation but the judge in this situation has an awful lot of power," said John Shepard Wiley Jr, an antitrust professor at the University of California in Los Angeles who has used the Microsoft proceeding as a case study in his classes. "She has enough tools to discipline an unruly litigant. It's not an ideal world and these cases represent a genuine challenge to the judiciary. The conduct remedy may be a blunt instrument but it's certainly not impotent."
Consent decree
Now in private practice, Sporkin says he believes a consent decree can be fashioned to fix the problems identified by the case, particularly if it includes some tough enforcement mechanisms. He added that he is not at all troubled by the prospect of a court's spending years overseeing the company, as Greene did in the AT&T case.
For their part, some prosecutors say they have taken a lesson from the government's experience with the earlier consent decree that Sporkin tried to reject.
"We can learn from our experiences with the consent decrees on how to frame them and how to monitor them," said Richard Blumenthal, the attorney general in Connecticut.
But some state prosecutors said they were concerned that the new leadership at the Justice Department would be more forgiving of the company, and they vowed to press any remedy to also include restrictions on Windows XP.
"We look forward to continuing to work with the Department of Justice in the proceedings that are about to begin before the trial court," said Eliot Spitzer, the attorney general of New York. "But we will, if necessary to protect the public, press for remedies that go beyond those requested by the Department of Justice."
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