By Stephen M. Hudspeth

The biggest antitrust news in the States in the past month (and perhaps in the latter half of this century!) has been the filing by the United States Department of Justice on behalf of the US government and, in separate papers, the filing by 20 state governments in the US of suits against Microsoft. All these actions were filed on May 18th. However, none of them is targeted to delaying the roll out of Windows '98, which is reported to be progressing on schedule.

At the heart of all of these actions is the question of the extent to which Microsoft is improperly leveraging market power in the operating system represented by its Windows product into other fields where it does not, as yet, have market power. Foremost among these fields is the Internet Browser which is not only a valuable set of computer tools in its own right for accessing the Internet but also has the capability of enabling the user to avoid dependence on Microsoft's Windows product. As stated in the complaint filed by the 20 states through their state attorneys general, "If an application is written to run on the browser, it can be platform-independent in the sense that it does not depend on compatibility with an underlying operating system. Rather, it depends on compatibility with the internet browser and associated technologies."

Thus, it is apparent from the actions which have been commenced by the federal and state authorities in the US that they view restriction of availability of the browser through Windows '98 as a critical battleground in the technologies associated both with the Internet and with computer operating systems.

The US antitrust agencies and the courts have wrestled in recent years with what means properly define markets in high technology areas. The problem with definition of markets in such areas is that the technologies tend to change so rapidly that defining borders of substitutability is very challenging; furthermore, measurement of ease of entry, another critical part of the analysis, becomes especially difficult as the technology itself shifts and as would-be competitors find new ways to accomplish what may be the same objectives by cutting across traditional technology borders.

Under US antitrust laws, it is not unlawful for a company to hold monopoly power. It is only unlawful to have obtained that monopoly power improperly (as for example, through predatory tactics including predatory pricing as opposed to having a superior product) or to use that monopoly power which was lawfully acquired improperly (as for example, through tying or other compulsory methods designed to limit the access of the users to the existing area of monopoly unless the users also purchase products of the same vendor in a field in which it does not yet have monopoly power but in which it may be able to achieve that power by using these tactics).

The battle being fought here has a number of parallels with the battle fought almost 20 years ago over the nature and form of the US telecommunications industry. At that time, there was much fear that actions taken to restrain AT&T or even to break it up would destroy a very healthy American telecommunications industry without producing any measurable consumer benefit. As we have seen, however, the actual experience was quite different in that Americans have enjoyed competition in their telecommunications industry without producing any measurable consumer benefit. As we have seen, however, the actual experience was quite different in that Americans have enjoyed competition in their telecommunications market at the long distance level (and are now even beginning to experience such competition at the local level) at the same time that the overall national telecommunications system seems to be functioning just as well, if not better, than in the days of the AT&T monopoly.

So too, here, there seem to be very serious concerns about whether government intervention in the computer technology at issue in these cases will impede the development or the direction of growth of markets in which American technology is pre-eminent at present. However, there is the very real prospect, if these cases proceed successfully for the government plaintiffs, that a similar releasing of competitive forces in the computer industry will occur here to the benefit of consumers and the long-term health of the industry, as they did in the telecommunications industry after the AT&T divestiture.

Government entities at this point do not appear to be seeking radical divestiture as in AT&T or in the much earlier example of the Standard Oil trusts which were dominant at the end of the last century. Instead, it appears that the government is seeking better access for competitors to the Windows platform and restrictions on the ability of Microsoft to direct its market power in the operating system field to other related markets.

The first step in this process will be consideration by the courts of the government's request for preliminary injunctive relief. This issue should be ready for the courts to address in several months. The result of that initial consideration on preliminary injunction motions will probably very strongly influence the ultimate outcome of the legal process here.

Stephen M. Hudspeth is a partner of Coudert and the Head of its Litigation Department. He is a graduate of Yale University with combined B.A and M.A. degrees in economics and of the Yale Law School with a J.D. degree. Mr Hudspeth has twenty-five years of trial experience in complex civil and criminal commercial litigation in the federal and state courts of the United States and before government agencies. He is a member of the American Bar Association, the New York State Bar Association and the Association of the Bar of the City of New York.
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