Tangled Webs

    Crime & Punishment
Issue 6.6
December 13, 2001

There 'otta be a Law

Who says crime doesn't pay? Since Microsoft and the DOJ announced their proposed settlement, legal experts have been scratching their heads over how incredibly favorable it is towards Microsoft.

The settlement requires that Microsoft disclose Windows APIs to other companies -- something Microsoft claims it has always done -- and prohibits Microsoft from retaliating against OEMs who sell non-Microsoft products -- which is illegal. There are a few additional reporting requirements, but that is pretty much the extent of it. Microsoft is not even required to admit that they did anything wrong.

If this does not strike you as utterly bizarre, remember that the debate over whether Microsoft is a monopoly or is in violation of anti-trust laws has long been over. Nine federal Judges unanimously ruled that Microsoft is an illegal monopoly and guilty of eight separate anti-trust violations.

Yet in what seems like disregard for the judicial rulings, Microsoft is not required to admit it acted illegally nor is it required to stop the practices specifically found to be illegal. For example, the US Court of Appeals found Microsoft's bundling applications with Windows and the "co-mingling of code" to be illegal. Yet the settlement leaves Microsoft free to continue the practice.

In fact, Microsoft seems to be accelerating such behavior. WindowsXP comes bundled not only with a browser, but an email client, an instant messaging application, a payment gateway, a digital content licensing system, and internet telephony services. Most likely companies like Liquid Audio, Real Networks and Paypal will be going the way of Netscape.

Not only does this settlement do nothing to protect consumers against further price gouging or to restore competition, but it actually seems to condone further abuses of Microsoft's monopoly power.

Brair Rabbit

Microsoft scored another legal coup in its settlement of the private anti-trust cases. Microsoft is settling these suits for pennies on the dollar by providing some of America's poorest school districts with a billion dollars in refurbished computers, training and, lots of free Microsoft software. Again, Microsoft admits no wrongdoing, and all sides agree to portray this as an altruistic donation.

While I agree that getting computers into schools is a good thing, I can't help but object to an anti-trust settlement that results in the extension of the monopoly. Microsoft has always had trouble making inroads into the education market, where Apple has the largest installed base. Under the settlement, Microsoft makes a one-time chartable donation and will be basically be awarded the education market. After all, why should cash-strapped school districts buy Apple software when they can get Microsoft software for free? True, Microsoft has to give away software now, but in a few years it will be time to upgrade, purchase new services, decide on an Internet provider, and ask for support. Microsoft will be ready with an invoice.

As if to emphasize the absurdity of the deal, Red Hat software publicly pleaded to be punished in the same way. Red Hat proposed that Microsoft be required to provide $1 billion in refurbished hardware instead of software and that Red Hat be allowed to provide the free software and technical training to all school districts who wanted it.

Everyone is talking about the "billion dollar settlement", but there is very little cash involved. However, one figure this is being kept rather quiet is the sum that will be awarded to the plaintiffs' attorneys. You can be certain that the lawyers themselves are not settling for the satisfaction of knowing that more children will have access to Microsoft software. The lawyers will be paid in cash.

It seems that we are now at the point where both Microsoft and the plaintiffs' attorneys will make more by settling than by prolonging litigation. The actual plaintiffs get nothing, and the settlement contains no remedy for the anti-trust damage done, but that's the way class action law works. Sadly, American class action lawsuits long ago stopped being about protecting consumers. Today they revolve around how much money lawyers can extort from their mark. If there is any doubt as to this, we only have to look at the fact that it was the prosecuting attorneys, not Microsoft, who came up with the whole "chartable donation of software" ploy. They wanted to make this as attractive as possible to Microsoft.

The End of History?

The Department of Justice deal is harder to explain. The DOJ spent three years and millions of dollars prosecuting this case. They won nearly every claim presented and had them upheld on appeal. Now they are simply giving up. The settlement is far weaker than the deal Microsoft offered before they lost their appeal. In fact, it is far weaker than the 1994 consent decree Microsoft violated in the first place, and it does not even begin to address the settlement requirements laid out by the court of appeals.

The most popular explanation is political pressure, perhaps linked to some backroom deal with the Bush administration. Many are claiming that a deal was struck between Microsoft, who now pretty much controls the Internet, and the DOJ who would very much like to. With the introduction of XP, Microsoft can easily retrieve the name and address of the creator of any Office document or the viewer of a web page. It would be illegal for the government to collect this information, but not for a private company.

The theory has a certain logic to it, but there is no evidence of such an agreement, and it would be highly illegal. However, one has to look at the current war on terrorism, the 180-degree turn by the Justice department, and the speed at which the States were asked to sign onto the settlement and wonder what is really going on.

It is worth pointing out that neither the DOJ nor the private settlements are final. Both must be approved by the presiding judges, and in both cases there is serious doubt the proposed settlements will be found acceptable. Nine of the states have refused to sign onto the DOJ's settlement. It is also unlikely that the Europeans will not settle their anti-trust claims as quickly as the Americans have. However, it is equally possible that Microsoft is about to be awarded full and unfettered control of the desktop and the Internet markets. Using that leverage, they will own the server market within a decade. It is this eventuality concerns me. Not because Microsoft is somehow evil, but because of what it will do to the computer industry.

I began writing software 20 years ago. I believe there is no endeavor that approaches software engineering's unique blend of creativity, beauty, practicality and egalitarianism. For the last few decades, any group of kids working in their garage had a shot at changing the world. It breaks my heart to see the market destroyed in this way.

It doesn't have to end like this.

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© Copyright 2001, Tim Romero, t3@t3.org
This article first appeared in the December 13th edition of The Japan Times.
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