On May 16, 1998, Bill Gates walked away from negotiations with the US Department of Justice’s Antitrust Division and the attorneys general of 20 states to prevent the threatened filing of a sweeping antitrust suit against Microsoft. Gates had offered many concessions in the spirit of compromise, but he refused to accede to the demand that Microsoft agree to distribute the software of its archrival Netscape.
Since then the Dow Jones Industrial average has fallen 5.6%. The S&P 500 Index has fallen 18.1%. And the NASDAQ Composite has fallen 24.4%. But the stock of Microsoft is up 30.9%. Netscape is no more. And on Friday judge Colleen Kollar-Kettely approved a settlement that leaves Microsoft very much intact — over the strident objections of nine states’ attorneys general seeking far harsher penalties and structural remedies.
Federal judge Colleen Kollar-Kotelly’s approval of the settlement between Microsoft and the Department of Justice, as well as a number of cooperating states, was the best possible decision — given that Microsoft’s business is a court’s business to begin with (which it’s not). Kollar-Kotelly struck a powerful blow against the state attorneys general who had tried to block the settlement, seeking harsher penalties and all manner of competitive remedies. The judge strongly rebuffed the states attorneys general’s scorched earth approach of bringing “all existing allegations of anticompetitive conduct — which have not been proven or for which liability has not been ascribed.” She ruled, “This court has had little choice but to reject [those states’] remedial suggestions on the grounds that they are unjustifiably in conflict with the imposition as well as the rejection of liability in this case.”
Setting herself against the angry and punitive tone of her predecessor in this case — Thomas Penfield Jackson, whose judgment was overturned on appeal because of its arbitrary harshness and because of the judge’s clear prejudice in the case — she wrote, “Ultimately, the goal of a remedy in an equitable suit is not the ‘punishment of past transgression, nor is it merely to end specific illegal practices.’ Equitable relief in an antitrust case should not ’embody harsh measures when less severe ones will do,’ nor should it adopt overly regulatory requirements which involve the judiciary in the intricacies of business management.” Bravissima!
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The stock market celebrated Microsoft’s victory Monday, as well it might. In the war on capitalism it was an important victory for the capitalists.
But its meaning is not so much that it sets powerful pro-capitalist precedents that will be used in other trials in the future, or that it signals a U-turn in antitrust activism back toward the laissez-faire approach of the Ronald Reagan years. It does neither of those things.
Its meaning is simply that victory is possible. You can fight the power. Resistance is not futile.
That may not sound like much. Sure, there are lots of things that would better — such as if US Attorney General John Ashcroft fired all the Clinton-era antitrust zealots who still dominate the DOJ, or if Congress passed a law limiting the role of states attorneys general in federal antitrust and securities prosecutions (or, best of all, if Elliot Spitzer would fall into an open manhole).
But don’t fail to recognize the subtle but important power of a shift, at the margin, in the game theory calculus of the combatants in the war on capitalism. If corporate defendants begin to factor into their strategies that they just might win — and if regulators and especially state attorneys general begin to factor into their strategies that they just might lose — perhaps capitalists won’t be in such a hurry to march themselves into the gas chamber at the first threat of prosecution.
