Commentary

Beyond the Browser Wars: Antitrust as Vendetta

Last month the U.S. Court of Appeals for the District of Columbia Circuit gutted the Justice Department’s claim that Microsoft can’t package its Internet browser with its Windows operating system. So Microsoft’s competitors, wary of the rough and tumble of a free market, have returned to Congress to promote yet another round of Microsoft bashing. Their instrument of choice: Sen. Orrin Hatch (R-Utah), chairman of the Senate Judiciary Committee and Mr. Reliable when it comes to whipping up anti-Microsoft frenzy.

This time the senator has seized on a white paper, recently released by the Software Publishers Association, that accuses Microsoft of attempting to monopolize the client/server market with its new Windows NT system. Designed for medium-to-large-scale users, servers store data and share computing functionality with networks of individual PCs.

According to the SPA — which concedes that its paper relied on input from “member companies” like Microsoft’s arch-rivals Sun, Netscape, Novell, Oracle and IBM — Microsoft is guilty of anti-competitive behavior. Among the company’s more insidious practices (hold your hat): Microsoft offers discounts on other products to purchasers of NT; ties other products to its server software (like every one of its competitors); pre-announces products, thereby chilling competition; and refuses to certify software as compliant with Windows 95 and 98 unless it is also compliant with NT.

None of those practices is illegal, of course, except that a “monopolist” can be held to a higher standard of conduct than a non-monopolist. Yet Microsoft — which started from scratch against entrenched competition and has only 40 percent of the server market today — can hardly be characterized as a monopolist. Never mind, says the SPA paper; it’s now time to “avert the erosion of competition” before Microsoft gets a “stranglehold” on the market.

What’s really going on here, of course, is a battle royal between differing business models. Microsoft licenses its NT system to many hardware manufacturers and relies heavily on independent developers for applications software. Sun, by contrast, insists that customers use Sun’s hardware. IBM does the same and, like Oracle, bundles applications software with its server. What galls Microsoft’s rivals is that NT is winning the war — because it’s cheaper, easier to use and boasts more applications programs than the other systems combined. Apparently, that is reason enough to scurry to Orrin Hatch, and reason enough for the senator to call for new hearings. His earlier grilling sought to brand Microsoft as a monopolist in the browser wars. Since the court exploded that theory, the next round is dubbed “Competition in the Digital Age: Beyond the Browser Wars.”


Just why are taxpayers sending American officials abroad to undermine an American company — to the detriment of its shareholders, its employees and its customers?


The very model of studied neutrality, Hatch states in his press release that he “hopes to learn more about the future direction of business and Internet-related software.” But by the end of the release we find him saying, “There is little question that Microsoft, which now controls the PC software market, is seeking to extend its desktop monopoly in effect to control these other technologies and, to a large extent, the network itself.” As with Alice in Wonderland, it’s verdict first, trial afterward.

If Senator Hatch were truly interested in contributing to the Microsoft investigation, there’s an important new development that does warrant the attention of the Judiciary Committee. In fact, Sens. Jeff Sessions (R-Ala.), Spencer Abraham (R-Mich.) and Jon Kyl (R-Ariz.) — all members of the Judiciary Committee — have already raised the issue in a July 14 letter to Attorney General Janet Reno, inquiring whether high Justice Department officials have tried to ratchet up the pressure on Microsoft by encouraging Japan, Brazil and Israel to bring copycat suits against the company.

The three senators wonder why the Japanese Fair Trade Commission, following a visit by Antitrust Division head Joel Klein, raided Microsoft’s Tokyo offices and confiscated documents pertaining to the company’s competition with Netscape — especially since Microsoft had previously agreed to cooperate fully with the Japanese government. Likewise, why did Russell Pittman, a section chief in the Antitrust Division, go to Brazil to publicly castigate Microsoft — nine days after which Brazilian authorities disclosed that they would take a look at Microsoft’s tie-in of its browser and operating system? And why did Dan Rubinfeld, chief economist in the Antitrust Division, goad Israeli officials, who were then in discussions with Microsoft, by proclaiming that the company “used its monopoly to create a noose around the Internet browser market”?

Those actions appear aimed at undercutting Microsoft’s global competitive position and its export market. Just why are taxpayers sending American officials abroad to undermine an American company — to the detriment of its shareholders, its employees and its customers? Senators Sessions, Abraham, and Kyl are absolutely right to demand an explanation from Janet Reno. They have insisted on a list of all Microsoft-related contacts, information exchanges, documents, and costs, along with the justification, if there is one, for each interaction between a Justice Department employee and a foreign government official.

Senator Hatch of late has been rightly critical of Attorney General Reno’s handling of the Clinton campaign finance investigation. We shall soon see whether he has a similar interest in her oversight of the department’s Antitrust Division.

Robert A. Levy is senior fellow in constitutional studies at the Cato Institute.