ÿWPCR  \sVY^égcø×Kš¸ûš„š£†-ðÙRrÈ»"”WÒ|ÈY1`.tDJ«!=ÈÈÈ F=‘KtäžÁ¢{ºØK[uÈU\-¾iZ40M£8õeÀ™…'-Q~{““ìµDlÇ´á"Ÿ;‡-=KÓMážœ›™ñ–Ží…¥¼ìm^J°ä›’…{Ëm!?põ{¦1­úЭ? ][µNåËvØàŽO%óÛ£[e»6¼Ìn›!m†ò,“ÂD­¦`oÐeX=Ú^ÓxD6%š.(p.…¥¡–øÊG€è= ޼_)7Y”Éân=âR2R}æ6Åævd†ÀEÓa"6Jµ»ÊèA”:ä“8|Þ"Âýæ¸×—Œ [`ìdo>ŠuÌ:‘*_c05õbÏ·rffb1æŸÞ›©J?%–n§ÜšMﵤú ͼ€Û>3ßóÉ'd'D›ŒÎ‰á£P1ylfï“eû¸£ÕQ9 j*U üç« ÖŒÙ½ÿîC]® {LØÃë‚Ð>ƒH¾Ä—¡dñ/RÒn¶VÝTñkÈæQßøz²=Ï üá0¤¼6í[m^è °¹—$þ${)Ÿ`ÍX(öZ¢¥eúJx¢›ˆÌMîU>ò 0Þ0 0<¶J 0Ž#!žUN¿ % N ^  w! 4% 9 m; ô\  `&Times New Roman8)oÿÿ6Heading 1 Ô€XXXÔò òÔ  ÔÔ  ÔÔ€ôôôÔó ó<ÿÿ:Default Para' Disclaimer: This may not be the most updated and final copy of our site, but its close en4te, but its close en$PC Automation 0 .   #|x(f*$¡¡ÒܰÒÒܰÒÓ  ÓÔ€ ôNšõX XÔÔ€ôNšõõ ôNšÔ˜Epson Stylus COLOR 50 (Copy 2)”ÌÌ”0(  Z‹6Times New Roman Regular Xêa )csbö(ˆ1…ÿU‹ÿÀÀÀÝ ƒ*!ÝÒܰÒÒܰÒÓ  ÓÔ€ ôNšõX XÔÔ€ôNšõõ ôNšÔÝ  ÝÑ  Ñò òÔ_ÔDisclaimeró ó:€This€may€not€be€the€most€updated€and€final€copy€of€our€site,€but€itððs€close€enough€and€containsÐ ° Ðapproximately€the€same€information.Ô€XO XõôNšÔò òÐ xÈ ÐÌNote€to€Usersó óÐ )y ÐÓ XÓWhen€we€began€researching€and€planning€the€content€for€this€site,€we€planned€toÏcreate€a€comprehensive€guide€to€the€history€of€antitrust€cases€and€a€source€forÏinformation€and€discussion€relating€to€current€and€future€cases.€Along€the€way,€we€madeÏa€discovery€that€we€think€adds€enough€to€make€the€site€a€springboard€into€somethingÏmoreð"ða€new€way€of€looking€at€the€study€of€the€antitrust€movement.ÌDuring€our€intensive€research,€we€realized€a€trend€was€developing.€This€trend€runsÐ ¶   Ðthroughout€the€history€of€antitrust,€and€seems€to€make€the€antitrust€issue€a€goodÏmicrocosm€with€which€to€teach€students€about€the€proceedings€of€the€US€government,Ïfrom€the€legislative€to€the€judicial.ÌÐ jº  ÐThe€history€of€antitrust€action€is€a€shaky€one,€with€periods€of€both€lethargy€and€energy,Ð W§  Ðthe€only€constant€being€ambiguity.€The€policy€makers€of€this€country€learned€long€agoÏthat€clear,€unambiguous€language€can€be€a€dangerous€tool€in€the€wrong€hands.€Bills€thatÏcontain€this€sort€of€language€inevitably€contain€loopholes,€which€were€impossible€toÏforesee€when€the€bill€was€made.€Eventually,€potential€violators€will€find€and€exploitÏthese€loopholes.ÌAs€a€result,€legislation€often€takes€an€all„encompassing,€albeit€vague€approach€inÐ å5 Ðdefining€violations,€ultimately€leaving€room€for€broad€interpretation.€This€is€one€reasonÏthe€judicial€branch€was€founded.€Many€court€cases€are€not€clear„cut,€guilty€or€not€guiltyÏdecisions.€Often,€the€court€is€called€upon€to€articulate€exactly€what€was€intended€by€theÏlaw€as€enacted€by€the€legislators€before€judging€whether€or€not€the€defendant€violatedÏthat€law.€Thus€this€approach€to€legislating€leads€to€an€endless,€though€absolutelyÏnecessary,€string€of€engaging€debates€on€the€subject.€This€debate€often€results€in€changesÏin€the€very€intended€meaning€of€the€original€legislation,€sometimes€at€the€hand€ofÏchanging€social€climates.ÌÐ :Š ÐFor€instance,€think€of€the€way€the€potential€interpretation€of€the€right€to€bear€armsÐ ' w Ðhas€changed€after€the€emergence€of€an€ever€increasingly€violent€society€armed€with€everÏincreasingly€accurate€killing€machines.€No€matter€your€stance€on€the€issue,€scarce€fewÏwould€have€suggested€removing€or€censoring€this€constitutional€right€200€years€ago€whenÏAmerica€was€a€more€untamed€place.€The€ability€to€change€our€interpretation€ofÏlegislation€is€one€of€the€properties€that€makes€our€system€so€strong;€the€system€is€open€toÏchange,€and€able€to€adapt€and€evolve€to€better€fit€societyððs€needs,€should€those€needsÏchange,€without€overhauling€the€entire€system€and€rewriting€the€constitution.ÌÐ 'ß"& ÐAntitrust€is€another€good€example€of€this€trend€of€ambiguity€and€debate€in€US€politics.Ð |(Ì#' ÐThe€Trust€Issue€is€a€thorny€one,€with€opponents€touting€the€American€ideal€of€the€freeÏmarket€and€trustbusters€citing€the€economic€benefits€of€competition€and€claiming€theÏright€to€intervention€on€behalf€of€the€consumer.ÌBesides€the€essential€debate€over€the€entire€concept€of€antitrust€law,€there€is€also€theÐ 0,€'+ Ðdebate€over€the€validity€of€leveraging€as€a€violation€of€antitrust€laws.€More€debate€isÐ -m(, Ðcentered€on€whether€prevailing€economic€conditions,€such€as€global€competition€and€theÏfaster€pace€of€the€business€world,€make€the€old€systems€of€antitrust€analysis€obsolete.€Antitrust,€now€a€hundred€years€old,€still€confuses€and€confounds€the€judiciary€and€sparks€electric€debate€among€political€and€economic€analysts.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓHopefully,€by€reading€about€the€history€of€antitrust€action,€including€the€conditions€that€prompted€debate€on€the€subject€and€the€initial€actions€in€response€to€The€Trust€Issue,€and€by€reading€the€case€study€of€the€antitrust€actions€taken€against€Microsoft,€students€of€antitrust€will€become€students€of€US€politics€and€earn€a€deeper€understanding€of€the€nature€of€the€debate,€and€the€action,€which€drives€our€political€system.ÌÓ  ÓÌÌÌò òAntitrust€History/Backgroundó óÌÌòòPost€Civil€War€Industrial€GrowthóóÌÓ X ÓThe€years€before€the€American€Civil€War€were€the€golden€age€of€small€industry,€with€most€businesses€owned€by€a€single€entrepreneur,€family,€or€small€group€of€stockholders.ÌÓ  ÓÓ X ÓThe€Civil€War€accelerated€the€effects€of€the€industrial€revolution€in€America.€Wartime€economic€booms€provided€the€needed€capital,€the€pressing€necessities€of€battle€gave€birth€to€rapid€advances€in€manufacturing€and€machinery,€and€policies€of€reconstruction€brought€more€industry€into€the€south€after€the€war.ÌÓ  ÓÓ X ÓIn€consequence,€the€war€left€America€a€much€more€industrialized€nation.€The€industrial€revolution€in€turn€made€larger€industrial€concerns€possible€and€profitable.ÌÓ  ÓÌòòBig€BusinessóóÌÓ X ÓBefore€the€industrial€revolution,€most€manufacturing€was€done€in€small€scale€by€small€groups€without€much€aid€from€machinery.€After€the€industrial€revolution,€most€production€took€place€in€large€factories€that€employed€many€people€and€used€machines€to€produce€a€large€volume€of€goods.€Several€factors€made€this€change€possible,€particularly€changes€in€the€social€and€economic€order€during€this€time.ÌÓ  ÓÓ X ÓThe€biggest€change€was€in€the€availability€of€new,€advanced€machinery.€The€amount€of€profits€a€company€makes€on€its€product€depends€on€how€much€of€the€product€is€made.€Making€more€will€mean€more€is€sold,€but€the€market€will€also€flood,€causing€the€price€for€each€individual€unit€sold€to€drop.ÌÓ  ÓÓ X ÓThe€introduction€of€labor€saving€machines€made€manufacturing€cheaper,€but€startup€costs€higher.€This€meant€that€to€overcome€the€startup€cost,€you€had€to€sell€more€product,€which€was€made€possible€by€the€cheaper€production€costs.€Thus,€the€invention€of€machinery€made€some€increase€in€the€scale€of€production€not€only€possible,€but€necessary€to€turn€a€profit.ÌÓ  ÓÓ X ÓA€system€of€high€protective€tariffs,€in€which€the€government€charges€high€taxes€on€imported€goods€to€make€buying€domestically€produced€goods€a€more€viable€alternative€to€foreign€ones,€began€in€1861.€This,€coupled€with€higher€volume€of€production€made€possible€by€labor€saving€devices,€meant€a€lot€of€prosperity€for€American€businesses,€which€led€to€natural€growth€and€expansion€in€domestic€businesses.ÌÓ  ÓÓ X ÓAn€accelerated€growth€in€the€size€of€the€nation€was€also€taking€place.€An€increase€in€the€birthrate€came€from€post€war€economic€and€social€prosperity;€recent€cessions€of€territory€increased€our€land€area€and€led€to€new€settlements€in€the€frontiers.€All€of€this€growth€led€to€an€increased€demand€for€products,€and€industries€had€to€grow€to€accommodate€that€demand.ÌÓ  ÓÌòòConsolidation€TrendsÌÓ X ÓóóThe€newly€industrialized€economy€gave€rise€to€such€intense€competition€that€businesses€were€driven€to€combination€and€pooling€resources€to€survive;€many€didnððt€and€were€driven€to€bankruptcy.€Uniting,€gave€them€a€better€chance€of€surviving€this€competition€and€limited€the€pool€of€competitors,€further€increasing€their€chance€of€survival.ÌÓ  ÓÓ X ÓThe€consolidation€trend€was€followed€in€two€stages€in€the€years€after€the€Civil€War.€The€first€stage€lasted€from€1879€to€1893€and€was€marked€by€horizontal€combinations,€in€which€companies€making€similar€products€in€the€same€stage€of€production€combine.€For€example,€a€steel€factory€would€combine€with€other€steel€factories,€but€not€with€iron€ore€mines,€which€supply€the€necessary€raw€materials€for€steel€production.€The€second€stage€lasted€until€1904,€and€was€marked€by€vertical€combinations.€In€a€vertical€combination,€companies€in€various€stages€of€production€combine,€such€as€steel€factories€with€mines.ÌÓ  ÓÓ X ÓÌÓ  ÓòòAdvantages€of€CombinationóóÌÓ X ÓLarge€companies€found€it€easier€to€secure€good€management,€and€had€a€larger€pool€of€workers€to€pick€from€for€promotions.€Bargaining€with€labor€and€bankers€was€also€easier€for€large€corporations,€because€they€had€a€solid€reputation€and€were€backed€by€many€stockholders.ÌÓ  ÓÓ X ÓTransportation€of€product€was€a€huge€factor€in€consolidation,€as€railroad€companies€and€other€support€industries€often€offered€considerable€volume€discounts€and€other€incentives€to€companies€with€high€output.ÌÓ  ÓÓ X ÓThe€industrial€revolution€made€operating€a€business€riskier€than€ever.€Increased€volume€of€production€saturated€the€markets€and€created€ferocious€competition€for€customers.€Constant€advances€in€technology€made€it€hard€for€some€firms€to€keep€pace.€The€high€investment€involved€in€acquiring€a€factory€and€machinery€discouraged€many€new€entrepreneurs€from€entering€competitive€fields.ÌÓ  ÓÓ X ÓThese€factors€all€contributed€to€the€rising€trend€of€consolidation.€Businesses€all€over€America€combined€into€trusts€and€corporations,€and€pooled€resources€to€limit,€and€in€many€cases€eliminate€competition,€creating€industry„wide€monopolies.ÌÓ  ÓÌòòRise€of€CorporationsÌÓ X ÓóóAs€industrialization€spread,€investments€became€riskier€due€to€intense€competition,€and€more€expensive€due€to€higher€starting€costs€of€machinery€and€factories.€Business€ventures€became€too€much€for€a€single€entrepreneur€to€handle,€and€the€new€corporate€form€of€business€was€established€after€the€Civil€War.€The€corporate€form€had€been€used€in€the€past,€mostly€in€the€formation€of€banks€and€the€building€of€turnpikes€and€railroads,€but€now€extended€to€all€business€fields.ÌÓ  ÓÓ X ÓMany€operations€were€established€solely€for€the€purpose€of€eliminating€competition€in€business.€This€has€been€popularly€deemed€detrimental€to€industrial€development€and€the€public€interest.€In€response€much€legislation€has€been€passed€to€make€illegal€those€corporate€forms€that€were€commonly€abused€in€this€manner.€The€business€community€was€then€forced€to€invent€new€corporate€forms€to€pursue€this€end,€such€as€pools,€trusts,€holding€corporations,€and€mergers.ÌÓ  ÓÌòòThe€Corporate€FormóóÌÓ X ÓIn€the€Dartmouth€College€case€of€1819,€Chief€Justice€John€Marshall€defined€a€corporation€as€ð ðan€artificial€being,€invisible,€intangible,€and€existing€only€in€contemplation€of€law.ðð€A€more€specific€definition€of€corporation€is€an€association€chartered€by€the€government€to€do€business€and€uphold€the€public€interestÌÓ  ÓÓ X ÓCorporations€are€often€made€up€of€a€large€pool€of€investors€and€a€small€group€of€directors€who€orchestrate€the€actual€legal€and€business€dealings€for€the€corporation.ÌÓ  ÓÓ X ÓA€corporation€can€issue€stocks€and€bonds€and€buy€and€sell€properties.€It€is€not€disrupted€by€the€death€or€retirement€of€its€members€like€other€business€forms.€Another€advantage€is€that€the€stockholders€have€liability€that€is€limited€by€law,€and€arenððt€fully€responsible€for€the€corporationððs€actions.ÌÓ  ÓÓ X ÓIn€the€ideal€situation,€the€corporation€is€a€business€form€in€which€many€people€can€take€a€small€part€in€the€industrial€development€of€the€country€by€contributing€only€money,€while€the€management€chosen€to€handle€the€actual€business€is€made€up€of€men€of€great€ability€that€can€properly€guide€the€corporation€to€achieve€success€and€uphold€the€public€interest.ÌÓ  ÓÓ X ÓUnfortunately,€in€a€corporation€the€number€of€stockholders€is€so€large€that€they€have€very€little€power€over€the€corporation.€Because€they€have€little€power,€the€stockholders€often€have€little€interest€in€the€actions€of€the€corporation,€so€long€as€their€investment€is€returning€dividends.€Furthermore,€the€directors€are€seen€as€agents€of€the€corporation€itself,€which€is€a€separate€legal€entity,€and€arenððt€responsible€to€the€stockholders€directly.ÌÓ  ÓÓ X ÓThis€position€of€irresponsibility€on€the€part€of€the€members€and€unchecked€power€in€the€hands€of€the€directors€often€leads€to€abuses,€such€as€using€the€corporation€to€accomplish€personal€agendas,€rather€than€the€public€good,€which€they€are€chartered€to€uphold.ÌÓ  ÓÌòòTypes€of€CorporationsóóÌÓ X ÓA€trust€is€a€corporation€organized€for€the€purpose€of€eliminating€competition€in€an€area€of€business,€usually€for€the€purpose€of€controlling€prices€and€output€levels.€In€some€cases,€trusts€are€merely€distinct€companies€that€band€together€in€agreements€to€cooperate€rather€than€compete;€others€are€separate€companies€that€actually€join€to€become€a€single€corporate€entity.€Trusts€have€existed€in€five€general€forms€in€this€nationððs€past.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓOne€of€the€earliest€methods€of€combining€and€consolidating€businesses€was€pooling.€Pools€were€a€temporary€and€voluntary€organization€of€separate€entities.€Each€corporation€would€enter€into€a€mutual€agreement€that€would€often€fix€production€rates€and€prices€and€set€aside€exclusive€markets€in€which€each€participant€could€operate€unhindered€by€competition.ÌÓ  ÓÓ X ÓPools€were€not€only€temporary,€but€were€monopolistic€in€nature€and€thus€illegal.€Because€of€this€fact,€violations€of€a€pool€agreement€could€not€be€tried€in€court,€and€the€contract€was€not€legally€binding.€Pools€were€declared€illegal€in€1887€by€the€Interstate€Commerce€Act€and€in€1897€by€the€Supreme€Court€in€the€case€against€Trans„Missouri€Frieght€Association.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓBusinessððs€next€step€in€combination€was€the€trust.€Its€main€advantages€were€that€it€was€legally€binding€and€more€permanent€than€pooling.ÌÓ  ÓÓ X ÓTrusts€were€formed€when€stockholders€in€several€corporations€exchanged€their€stock€certificates€with€a€group€of€trustees€for€trust€certificates.€The€trustees€then€had€influence€over€the€separate€corporations€for€which€they€consequently€held€stock€and€could€orchestrate€their€cooperation€with€one€another.€Abuses€in€this€system€led€to€the€breakup€of€many€trusts,€which€led€to€a€search€for€another€method€of€combination.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓBusiness€next€turned€to€holding€companies,€which€are€corporations€set€up€to€hold€dominant€amounts€of€stock€in€other€corporations.€In€the€case€against€the€Northern€Securities€Company€in€1904,€it€was€decided€that€the€concept€of€a€holding€company€was€not€illegal,€but€an€individual€holding€company€could€be€if€its€obvious€intent€was€to€create€a€monopoly.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓAnother€method€of€combination€involves€the€absorption€of€one€company€into€another,€the€merger.€This€often€occurs€when€one€company€buys€a€dominant€amount€of€stock€in€another,€as€in€a€hostile€takeover.ÌÓ  ÓÓ X ÓAn€amalgamation€is€similar€to€a€merger,€but€in€this€case€both€companies€involved€are€merged€into€a€third€corporation,€and€the€individual€parts€give€up€their€original€charters.ÌÓ  ÓÓ X ÓMergers€and€amalgamations€are€still€legal€and€quite€common,€but€the€Celler„Kefauver€Antimerger€Act€now€permits€the€government€to€intervene€in€any€merger€that€would€have€the€effect€of€lessening€competition€in€a€field€of€business,€preventing€monopolies€of€this€type.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓCommunities€of€interest€occur€when€a€small€group€of€business€leaders€hold€large€amounts€of€stock€in€several€companies€in€related€industries,€and€can€coerce€cooperation€between€them.ÌÓ  ÓÓ X ÓA€similar€method€of€combination€is€the€interlocking€directorate,€in€which€people€sit€on€the€board€of€directors€for€several€competing€firms.ÌÓ  ÓÓ X ÓBoth€of€these€methods€of€combination€were€made€illegal€under€the€Clayton€Antitrust€Act,€but€they€can€still€exist€if€the€business€leaders€hire€puppet€directors€to€sit€on€the€other€boards€and€carry€out€their€will€indirectly.ÌÓ  ÓÌòòEra€of€the€MuckrakersóóÌÓ X ÓThe€Civil€War,€Reconstruction,€and€race€relations€led€to€a€great€deal€of€social€unrest€in€the€19th€century,€and€much€of€the€negative€aspects€of€society€were€overlooked.€Also,€a€slow,€unstable€economy€left€Americans€unwilling€to€experiment€with€new€ideas.€So€when€writers€such€as€Henry€George,€Edward€Bellamy,€and€Henry€Demarest€Lloyd€spoke€of€the€ills€of€modern€society€in€the€late€1800ððs,€it€is€no€surprise€they€were€ignored.€The€fact€that€they€were€all€associated€with€unorthodox€political€movements€led€most€Americans€to€write€them€off€as€socialists,€further€limiting€their€appeal.By€the€20th€century,€the€economy€had€gotten€a€good€deal€stronger€and€social€issues€of€the€past€decades€had€cooled€a€bit,€so€Americans€had€time€to€reflect€on€societyððs€ills€and€the€Era€of€the€Muckrakers€began.€Publications€everywhere€were€flooded€with€social€commentaries,€which€stirred€the€public€to€call€for€changes.€The€demand€for€change€led€to€the€birth€of€the€Progressive€Movement€in€American€politics.ÌÓ  ÓÓ X ÓMuckrakers€saw€corruption€everywhere,€from€industry€to€politics€to€society,€but€their€investigations€always€seemed€to€lead€to€the€same€conclusionð"ðthat€economic€power€was€concentrated€into€the€hands€of€too€few,€that€this€power€had€corrupted,€and€that€corruption€had€spread.ÌÓ  ÓÓ X ÓÌÓ  ÓòòTR€&€the€Early€Antitrust€MovementÌÓ X ÓóóTheodore€Roosevelt€was€one€of€the€first€and€greatest€presidents€of€the€Progressive€Movement.€He€was€president€during€the€era€of€the€muckrakers€when€social€critics€were€very€successful€in€swaying€public€opinion€toward€change€and€turning€attention€toward€societyððs€ills.€His€domestic€plan,€called€the€Square€Deal,€advocated€a€moral€approach€to€solving€societyððs€problems€and€an€equal€chance€in€life€for€all€people€and€businesses.ÌÓ  ÓÓ X ÓIn€his€fight€against€trusts€and€monopolies,€he€passed€the€Hepburn€act,€which€strengthened€the€Interstate€Commerce€Commission€and€ended€the€unfair€business€practices€of€the€railroads,€such€as€dropping€fares€to€drive€competitors€out€of€business.€He€also€vigorously€enforced€the€Sherman€Antitrust€Act,€raising€lawsuits€against€many€trusts.€These€suits€were€largely€unsuccessful,€but€brought€attention€to€the€need€for€legal€action€against€trusts.ÌÓ  ÓÓ X ÓÌÓ  ÓòòElection€of€1912óóÌÓ X ÓThe€presidential€election€of€1912€was€a€particularly€dramatic€one.€The€organization€of€a€Progressive€party€under€the€beloved€Theodore€Roosevelt€made€it€a€three€way€race.€The€Republicans€chose€the€incumbent€William€Taft,€who€took€a€conservative€non„progressive€platform.€The€choice€of€Woodrow€Wilson€to€run€on€the€Democratic€ticket€assured€a€vitally€important€race€for€students€of€antitrust,€showcasing€the€two€opposing€schools€of€thought€emerging€on€the€trust€issue.ÌÓ  ÓÓ X ÓRoosevelt€believed€that€prosecution€under€the€Sherman€Law€should€end.€He€said€trusts€and€even€monopolies€were€a€natural€state€of€business€brought€on€naturally€by€competition,€and€a€return€to€a€competitive€state€would€be€simply€futile.ÌÓ  ÓÓ X ÓHe€said€trusts€should€be€kept€in€tact€and€regulated€by€a€government€commission,€which€would€see€to€it€that€they€were€well€behaved€and€acted€only€in€the€public€interest.€If€this€method€were€carried€out,€he€said€there€would€be€no€need€to€prosecute€or€break€up€the€trusts;€their€dangerous€monopoly€power€would€be€kept€from€abuse.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓWilson€believed€that€prosecution€should€continue€under€the€Sherman€law€and€the€law€should€be€strengthened€by€supplemental€legislation.€He€said€that€trusts,€by€their€very€size,€are€less€than€optimally€efficient,€and€only€seem€to€prosper€due€to€lack€of€competition.ÌÓ  ÓÓ X ÓHe€said€competition€should€be€restored,€and€then€regulated€to€see€that€it€is€fair.€Then€breakup€of€well„behaved€trusts€would€be€unnecessary,€as€small€new€businesses€with€better€facilities€and€management€would€gradually€overcome€them,€given€a€fair€chance.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓWithout€Rooseveltððs€influences,€Taft€abandoned€the€progressive€platform€that€got€him€elected€to€his€first€term€in€office,€and€reverted€to€his€true€conservative€self.ÌÓ  ÓÓ X ÓTaft€got€little€support€from€the€Republican€party,€still€reeling€from€the€exodus€of€its€progressives,€and€his€stand€on€trusts€and€tariffs€alienated€progressives€of€all€persuasions.€He€even€went€so€far€as€to€renounce€the€ð ðsensationalismðð€of€the€media€during€the€era€of€the€muckrakers.ÌÓ  ÓÓ X ÓWith€progressivism€in€full€swing,€Taft€stood€no€chance€of€reelection,€and€was€abandoned€by€most€supporters,€financial€and€otherwise,€midway€through€the€campaignRoosevelt€was€an€energetic€candidate€with€a€flair€for€the€dramatic,€and€he€took€the€nation€by€storm.€His€campaign€trips€were€immensely€successful,€and€he€quickly€attracted€a€fanatic€following.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓFearing€the€election€of€such€a€powerful€leader€with€such€radical€ideas€on€government€intervention,€his€opposition€turned€to€ferocious,€often€unreasonable€attacks.€His€platform€was€portrayed€as€a€call€to€revolution;€his€ideas€likened€to€socialism.€He€himself€was€called€a€ð ðpolitical€antichristðð€that€would€eventually€rise€to€despot€power€if€elected.ÌÓ  ÓÓ X ÓDespite€the€bold€opposition,€Rooseveltððs€chances€of€winning€the€campaign€were€slim€to€begin€with,€and€his€power€largely€illusory.ÌÓ  ÓÓ X ÓWilsonððs€nomination€gave€progressive€Democrats€a€candidate€they€could€stand€behind,€and€few€migrated€to€the€new€progressive€party.€This€left€Roosevelt€to€rely€largely€on€Republican€progressives€for€support.ÌÓ  ÓÓ X ÓProgressives€were€few€in€the€republican€ranks,€and€their€largest€concentration€was€in€the€agrarian€west.€Rooseveltððs€platform€was€contrary€to€the€western€progressivesðð€call€for€lower€tariffs€and€the€breakup€of€trusts,€so€most€western€progressives€were€opposed€to€Roosevelt.ÌÓ  ÓÓ X ÓIn€the€end,€Wilson€won€the€election,€and€it€is,€in€fact,€his€policies€we€still€practiceð"ðwith€varying€resultsð"ðin€relation€to€the€trust€issue.ÌÓ  ÓÓ X ÓThis€may€be€contrary€to€common€sense,€when€one€thinks€of€all€the€huge€corporations€that€dominate€our€industry€today.€One€might€think€that€we€have€been€following€Rooseveltððs€plan€of€keeping€monopolies€intact.€The€fact€of€the€matter€is€that€the€existence€of€competition€and€the€existence€of€large€corporations€are€not€mutually€exclusive.€Combination€in€restraint€of€competition€isnððt€the€only€recognized€economic€trend€that€would€have€the€net€result€of€creating€large€corporations€that€rise€to€dominate€their€markets.ÌÓ  ÓÓ X ÓAdam€Smith€took€a€Darwinistic€approach€to€competition,€saying€that€fair€competition€promoted€efficient€industrial€concerns€and€destroyed€weaker€ones.€The€end€result€is€that€the€firms€that€are€fit€to€survive€fair€competition€are€operating€at€optimal€efficiency,€and€thus€control€large€portions€of€the€market.€Thus€competition€and€large€corporations€are€not€mutually€exclusive.ÌÓ  ÓÓ X ÓÌÓ  ÓòòRooseveltððs€ProposalóóÌÓ X ÓEveryone€seemed€to€be€in€agreement€on€one€thing€in€the€election€of€1912ð"ðthe€Sherman€Act€had€to€go.€The€Sherman€act€was€weak€or€flawed€in€some€way€that€made€it€entirely€ineffective.ÌÓ  ÓThe€proposals€parted€ways€on€what€to€replace€it€with.€According€to€Roosevelt€and€his€supporters,€the€entire€law€was€flawed.€It€set€up€a€system€under€which€trusts€accused€of€anticompetitive€practices€were€to€be€prosecuted€and,€if€found€guilty,€were€to€be€fined€or€broken€up.ÌÓ X ÓThe€flaw€as€Roosevelt€saw€it€was€that€this€was€destructive€of€industry€and€not€conducive€to€economic€development.€He€believed€that€there€were€benefits€in€having€large€corporations,€and€that€competition€among€many€small€firms€would€create€so€much€waste€as€to€render€the€industries€inefficient.ÌÓ  ÓÓ X ÓHis€supporters€also€believed€that€competition€was€detrimental€to€the€public€interest.€People€rejected€the€unpredictable€and€violent€price€fluctuations€that€were€common€in€highly€competitive€markets.€For€instance,€if€a€consumer€buys€steel€for€a€building€frame€today€at€a€certain€price,€and€his€neighbor€buys€it€tomorrow€at€thirty€percent€less,€he€must€compete€with€his€neighbor€to€rent€the€space€in€his€building€even€though€his€neighborððs€building€was€thirty€percent€cheaper€to€make.€Thus€consumers€were€less€likely€to€buy€knowing€that€sharp€price€cuts€could€happen€at€any€time.ÌÓ  ÓÓ X ÓFurthermore,€Roosevelt€had€seen€in€several€cases€where€companies€broken€up€under€the€Sherman€Act€came€back€together€under€the€same€management€that€had€steered€them€wrong€in€the€first€place.€Worse€yet,€the€new€firms€were€sufficiently€small€independently€that€they€could€not€easily€be€tried€under€antitrust€legislation,€creating€a€sort€of€immunity.€He€pointed€out€the€Tobacco€Trust,€which€still€had€nearly€seamless€cooperation€between€the€resulting€firms€after€the€breakup€in€court.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓRooseveltððs€plan€was€to€create€a€regulatory€commission€similar€in€scope€to€the€ICC.€This€commission€would€block€any€anticompetitive€actions€by€the€trusts€before€they€were€perpetrated.€In€doing€so,€the€government€would€effectively€force€all€trusts€to€be€benevolent€and€well€behaved,€and€eliminate€the€need€to€sue€under€the€antitrust€laws.ÌÓ  ÓÓ X ÓRoosevelt€also€recognized€the€importance€of€taking€the€vagueness€out€of€current€antitrust€legislation,€so€the€new€commission€would€have€specific€rules€with€which€to€judge€violations.€He€said€it€was€unfair€to€judge€business€people€guilty€of€anticompetitive€practices€which€they€had€no€idea€would€be€interpreted€as€such;€likewise€it€was€unfair€to€judge€businessmen€who€stumble€into€violations€equally€harsh€as€those€who€openly€defy€known€laws.€It€was€essential€that€all€businessmen€know€what€they€can€and€cannot€legally€do.ÌÓ  ÓÓ X ÓHe€also€proposed€stopping€at€nothing€to€achieve€this€end.€It€was€vitally€important€that€business€be€reigned€in€at€all€costs,€even€if€it€were€deemed€necessary€to€impose€explicit€price€controls.€Many€feared€this€call€for€absolute€governmental€power€and€said€what€he€was€proposing€was€socialism.ÌÓ  ÓÓ X ÓMany€also€feared€that€condoning€past€violations€of€the€Sherman€act€and€allowing€violations€under€the€law€to€go€without€prosecution€would€lead€to€a€widespread€disrespect€for€the€law€in€general.ÌÓ  ÓÓ X ÓAnother€criticism€was€aimed€at€the€practicality€of€the€planned€commission.€The€planned€commission€was€similar€to€the€ICC€in€scope,€but€the€ICC€was€an€overworked€and€largely€ineffective€commission.€In€fact,€the€greatest€successes€of€the€ICC€were€in€the€regulation€of€competition,€not€of€existing€monopolies.ÌÓ  ÓÓ X ÓToday€the€FTC€and€the€DOJ€are€the€established€commissions€for€regulating€businesses.€Even€under€todayððs€plan€of€maintaining€competition€if€possible,€which€results€in€much€less€work€than€direct€regulation€of€industry,€these€commissions€are€reigned€in€by€being€unable€to€handle€their€caseloads.€For€example,€in€1999€the€FTC€declined€to€challenge€the€merger€of€CompUSA€&€Computer€City,€two€computer€superstores,€despite€their€recent€success€in€the€Staples/Office€Depot€merger.€They€won€a€preliminary€injunction€in€the€case,€which€dealt€with€the€related€market€of€office€superstores.€A€former€staffer€cited€the€FTC€workload€as€a€possible€reason.ÌÓ  ÓÓ X ÓÌÓ  ÓòòWilsonððs€ProposalóóÌÓ X ÓWilson€agreed€with€most€progressives€that€the€Sherman€Act€was€not€sufficient€to€handle€the€problems€created€by€trusts.€Few€doubted€the€law€had€some€flaws€or€weaknesses€that€made€it€entirely€ineffective,€but€there€was€disagreement€emerging€as€to€what€should€replace€the€law.ÌÓ  ÓÓ X ÓAccording€to€Wilsonððs€camp,€the€law€had€a€good€foundation,€but€didnððt€go€far€enough.€The€law€needed€more€powerful€and€specific€legislation€to€supplement€it€in€order€to€achieve€results.ÌÓ  ÓÓ X ÓThe€Sherman€Act€set€up€a€system€where€large€corporations€that€had€reached€their€position€by€unfair€means€of€competition€should€be€broken€up.€Wilson€advocated€this€approach,€saying€large€corporations€were€inefficient.€According€to€Wilson,€it€was€clear€that€trusts€did€not€prosper€in€proportion€to€their€size,€and€that€they€only€gained€power€in€market€segments€where€competition€ceased€to€exist,€and€were€actually€losing€ground€where€competition€still€stood.ÌÓ  ÓÓ X ÓWilson€said€large€corporations€were€inefficient€because€they€carried€both€efficient€and€inefficient€plants,€all€bought€at€exorbitant€prices€from€competitors.€They€could€afford€to€make€these€purchases€because€of€loans,€and€because€the€net€result€was€the€elimination€of€competition€which€was€detrimental€to€their€profits.€With€this€competition€out€of€the€way,€the€prices€they€set€were€undisputed,€and€they€could€cover€their€losses€by€raising€prices.ÌÓ  ÓÓ X ÓAdvocates€of€Wilsonððs€plan€feared€other€plans€for€maintaining€the€existence€of€large€corporations€and€trusts€as€dangerous€to€the€public€interests.€There€was€an€inherent€danger€in€the€concentration€of€power,€political€or€economic.€Wilson€said€the€founding€fathers€knew€this€when€forming€our€nation.€If€the€government€commission€was€all€that€stood€between€trusts€and€their€plans,€the€trusts€would€no€doubt€become€friendly€with€the€commission€and€spread€their€influence€throughout€the€government.€After€all,€businesses€had€been€corrupting€government€officials€for€decades.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓWilson€called€for€the€restoration€of€competition€in€all€branches€of€industry.€When€it€had€been€properly€established,€it€was€to€be€protected€and€regulated.€Many€denounced€competition€in€industry€as€wasteful,€but€Wilson€said€it€was€illicit€and€unfair€competition€that€was€wasteful.ÌÓ  ÓÓ X ÓHe€planned€to€establish€a€commission€to€regulate€not€trusts,€but€competition,€to€see€that€it€was€fair.€If€the€trusts€were€really€efficient€as€his€opponents€said€they€were,€they€would€prosper€in€fair€competition.€If€not,€new€competitors€could€enter€the€field€and€overcome€them.€He€predicted€that€it€would€not€be€necessary€to€break€up€all€trusts,€for€once€competition€returned€to€the€marketplace,€the€trusts€would€be€defeated€naturally€by€fair€competition.ÌÓ  ÓÓ X ÓÌÓ  ÓòòAntitrust€LegislationóóÌÌSherman€Antitrust€Act€(1890)ÌÓ X ÓThis€is€the€first€and€most€basic€of€our€nationððs€antitrust€acts,€and€was€passed€in€large€part€because€conservative€Republican€senators€who€opposed€the€bill€passed€it€in€exchange€for€the€passage€of€the€McKinley€Tariff.ÌÓ  ÓÓ X ÓThe€act€had€two€important€provisions.€The€first€made€every€contract€or€conspiracy€to€restrain€trade€in€interstate€and€foreign€commerce€illegal.€The€second€made€it€illegal€for€any€person€to€monopolize,€or€attempt€to,€or€conspire€with€others€to,€monopolize€any€part€of€interstate€and€foreign€commerce€or€trade.ÌÓ  ÓÓ X ÓOriginally,€conviction€under€the€Sherman€Act€was€a€misdemeanor,€and€violators€were€subject€to€a€maximum€$50,000€fine€and€up€to€a€year€in€prison,€plus€the€possible€breakup€of€the€offending€trust.€Over€time,€the€penalty€has€been€made€a€felony,€punishable€by€up€to€a€$1,000,000€fine€and€up€to€three€years€in€prison.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓUnfavorable€judicial€interpretations€weakened€the€law.€In€fact,€in€an€ironic€twist,€the€act€was€so€misinterpreted€at€one€point€that€business€actually€used€the€act€to€break€a€union€strike€on€the€grounds€that€the€union€had€conspired€against€interstate€commerce€in€doing€so.€In€the€famous€Danbury€hattersðð€case,€a€labor€union€was€held€responsible€for€financial€damages€sustained€during€a€union€boycott.€Some€courts€actually€questioned€the€legality€of€trade€unions€on€the€grounds€of€the€Sherman€Act€because€of€their€restrictive€rules€and€practices.ÌÓ  ÓÓ X ÓThe€decisions€in€the€cases€against€the€Standard€Oil€Company€and€the€American€Tobacco€Company€in€1911€introduced€the€ð ðrule€of€reasonðð€interpretation€of€the€Sherman€Act,€which€tried€to€differentiate€between€good€trusts€and€bad€trusts.€Many€believed€this€interpretation€weakened€the€act.€Later,€supplemental€legislation€provided€more€detailed€descriptions€of€the€offenses,€and€helped€tie€up€loopholes€that€were€discovered€in€the€act.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓClayton€Antitrust€Act€(1914)ÌÓ  ÓÓ X ÓThis€is€the€first€supplement€to€the€Sherman€Antitrust€Act.€It€was€meant€to€clarify€and€elaborate€on€the€offenses€that€were€deemed€illegal€in€the€Sherman€Act.ÌÓ  ÓÓ X ÓAlso,€the€Clayton€Act€cleared€up€the€confusion€about€the€Sherman€Actððs€application€to€labor€unions€by€explicitly€excluding€them€from€the€provisions€of€the€act€and€other€antitrust€legislation.€It€affirmed€the€right€for€unions€to€strike€and€limited€the€use€of€federal€injunction€in€labor€disputes.ÌÓ  ÓÓ X ÓThe€Clayton€Act€aimed€at€any€practices€that€substantially€lessened€competition€or€tended€to€create€a€monopoly.€Provisions€were€included€for€local€price„cutting€to€freeze€out€competitors€and€price€discrimination,€in€which€businesses€would€offer€different€prices€to€different€consumers€and€market€segments.€The€Clayton€Act€also€made€illegal€the€use€of€tying€contracts,€contracts€between€industry€and€consumers€or€suppliers€that€guaranteed€they€would€deal€only€with€that€business,€not€competitors,€in€exchange€for€various€kickbacks.ÌÓ  ÓÓ X ÓCombinations€in€restraint€of€trade€that€involved€the€purchase€of€stocks€in€competing€firms€(such€as€communities€of€interest)€and€the€occupation€of€directorial€seats€in€multiple€corporations€(i.e.€interlocking€directorates)€were€also€made€illegal€by€this€act.ÌÓ  ÓÓ X ÓÌÓ  ÓFederal€Trade€Commission€(1914)ÌÓ X ÓThe€same€year€they€passed€the€Clayton€Act,€congress€created€the€Federal€Trade€Commission,€a€government€committee€to€monitor€business€practices€and€keep€monopolies€under€control.ÌÓ  ÓÓ X ÓThe€FTC€had€the€power€to€issue€ð ðcease€and€desistðð€orders€whenever€it€found€unfair€competitive€practices€among€businesses.€These€were€analogous€to€warnings,€and€could€be€followed€by€prosecution€under€the€antitrust€laws€if€left€unheeded.ÌÓ  ÓÓ X ÓThe€FTC€monitors€businesses€by€investigating€price„fixing€and€price€discrimination,€and€by€prohibiting€mergers€and€amalgamations€that€may€lessen€competition€or€lead€to€monopoly.€They€also€investigate€false€advertising€and€false€labeling€of€products.ÌÓ  ÓÓ X ÓThe€FTC€reports€its€findings€to€the€government,€and€gathers€data€on€economic€and€business€conditions€for€the€President,€Congress,€and€the€public.ÌÓ  ÓÓ X ÓÌÓ  ÓRobinson„Patman€Act€(1936)ÌÓ X ÓThe€Robinson„Patman€Act€was€meant€to€elaborate€the€types€of€price„fixing€that€was€declared€illegal€in€the€Clayton€Act.€It€was€aimed€at€protecting€small€producers€from€being€frozen€out€of€markets€by€larger€corporations€by€local€price„cutting,€not€at€addressing€the€effects€of€price„fixing€on€consumers.ÌÓ  ÓÌCeller„Kefauver€Antimerger€Act€(1950)ÌÓ X ÓThe€Celler„Kefauver€Antimerger€Act€was€passed€to€prevent€firms€from€carrying€out€mergers€and€amalgamations€with€other€firms€if€the€effect€would€be€a€substantial€decrease€in€the€amount€of€competition€in€the€effected€industry,€or€if€the€merger€would€tend€to€create€a€monopoly.ÌÓ  ÓÓ X ÓÌÓ  ÓHart„Scott„Rodino€Premerger€Notification€Act€(1976)ÌÓ X ÓThe€HSR€act€strengthened€the€existing€Antimerger€act.€Itððs€major€provision€is€one€requiring€all€firms€to€present€relevant€data€and€go€before€the€FTC€for€approval€before€the€acquisition€of€any€company€worth€at€least€$15€million.€To€lessen€caseloads,€the€FTC€can€create€guidelines€under€which€firms€can€claim€exemption€from€this€act.ÌÓ  ÓÌòòSummary€of€Current€PoliciesóóÌÓ X ÓAntitrust€legislation€is€still€in€existence€today.€Its€effectiveness€is€dependent€upon€the€political€climate€of€the€times€and€thus€varies€accordingly.ÌÓ  ÓÓ X ÓAntitrust€legislation€is€still€on€the€books€in€America,€but€tends€to€be€vague€as€to€what€constitutes€abuses,€allowing€for€a€great€deal€of€variation€in€interpretation€by€the€courts.ÌÓ  ÓÓ X ÓFor€example,€the€United€States€Steel€Corporation€ruling€by€the€Supreme€Court€in€the€early€1920ððs€said€that€having€monopoly€power€did€not€constitute€an€infraction€of€the€Sherman€Act,€so€long€as€that€power€was€not€abused.€This€decision€was€reversed€in€the€later€ruling€of€the€1945€Aluminum€Company€of€America€case.ÌÓ  ÓÓ X ÓThe€effectiveness€of€antitrust€legislation€also€depends€on€its€selective€enforcement€by€the€administration€in€power.€It€is€the€Department€of€Justice,€headed€by€the€Attorney€General,€who€decides€when€to€prosecute€corporations€for€antitrust€violations.€The€Attorney€General€being€a€member€of€the€cabinet,€it€is€ultimately€the€president€who€decides€the€level€of€vigor€with€which€the€laws€are€upheld.ÌÓ  ÓÓ X ÓThe€prosecutorial€resources€available€to€the€DOJ€and€FTC€also€have€a€major€effect€on€the€enforcement€of€antitrust€laws.€For€example,€in€1999€the€FTC€declined€to€challenge€the€merger€of€CompUSA€&€Computer€City,€two€computer€superstores,€despite€their€recent€success€in€the€Staples/Office€Depot€merger.€They€won€a€preliminary€injunction€in€the€case,€which€dealt€with€the€related€market€of€office€superstores.€A€former€staffer€cited€the€FTC€workload€as€a€possible€reason.The€Federal€Trade€Commission€has€been€established€to€monitor€Big€Business€and€issue€ð ðcease€and€desistðð€orders,€which€are€analogous€to€warnings.€If€warnings€go€unheeded,€legal€action€may€be€taken€on€the€grounds€of€the€antitrust€laws.ÌÓ  ÓÓ X ÓThe€courts€have€not€been€consistent€in€their€interpretation€of€the€antitrust€laws€and€the€meaning€of€monopoly€power.€Several€antitrust€lawsuits€have€been€filed€in€past€years,€such€as€those€against€International€Business€Machines,€General€Mills,€General€Foods,€and€now€Microsoft,€but€no€new€principals€of€antitrust€law€or€clear€pattern€of€thinking€seems€to€have€emerged€through€the€rulings€or€the€choices€to€prosecute.ÌÓ  ÓÓ X ÓAll€in€all,€US€efforts€have€been€more€effective€at€preventing€complete€monopolies€than€at€maintaining€highly€competitive€markets,€so€we€are€following€more€closely€in€effect€to€Rooseveltððs€plan€than€to€Wilson.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓLately,€economists€have€been€paying€less€attention€to€the€antitrust€movement,€as€the€emergence€of€a€global€economy€and€worldwide€competition€makes€domestic€monopoly€seem€less€pressing€of€a€concern.ÌÓ  ÓÓ X ÓFor€example,€the€FCC€responded€to€the€acquisitions€of€Columbia€Pictures€and€MCA€by€Japanese€media€companies€Sony€and€Matsushita€respectively€by€deregulating€the€major€communication€networks.€They€hoped€that€American€studio€alliances€could€resist€buyout€by€foreign€firms.€As€a€result,€mergers€in€this€industry€have€been€rather€common€since€1993,€often€in€defiance€of€antitrust€legislation.ÌÓ  ÓÓ X ÓThe€fact€is,€despite€various€approaches,€no€modern,€non„communist€industrial€society€in€the€world€has€effectively€solved€the€problem€of€maintaining€competitive€markets€and€keeping€monopolies€in€check.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓEurope€has€had€a€very€different€approach€to€the€trust€issue€than€America.€They€have€had€a€tendency€to€nationalize€most€key€industries,€creating€public€monopolies,€when€competition€proved€more€harmful€than€helpful.€Other€businesses€have€been€allowed€to€form€cartels,€in€which€the€major€firms€get€together€in€voluntary€agreements€to€set€pricing€and€production€agreements,€which€are€carefully€monitored€by€the€state.€Such€agreements€are€illegal€in€the€American€system.ÌÓ  ÓÓ X ÓAnother€major€difference€in€the€European€system€is€that€more€concern€is€placed€on€unfair€competitive€advantages€than€the€American€system,€which€often€calls€for€proof€that€the€exploitation€of€these€advantages€cause€harm€to€consumers€in€some€way.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓIn€fact,€the€opposition€to€antitrust€legislation€has€been€mounting,€especially€in€recent€years.€In€1994€the€Libertarian€party€even€added€a€plank€to€their€platform€that€called€for€the€complete€abolition€of€antitrust€laws.ÌÓ  ÓÓ X ÓMany€sites€have€been€organized€in€opposition€of€antitrust€legislation€(see€our€links€page).€Among€these€are€the€Center€for€the€Moral€Defense€of€Capitalism€and€the€Freedom€to€Innovate€Network.ÌÓ  ÓÓ X ÓThere€is€even€evidence€put€forth€that€says€changes€in€antitrust€policy€has€resulted€in€booms€and€depressions€in€the€economy.€Times€of€diligence€in€trust€busting€seem€to€destabilize€the€economy,€cutting€production€and€profits.€Times€of€dormancy€in€antitrust€policy€tend€to€result€in€prosperity€and€economic€growth.€More€on€this€is€available€at€www.antitrust.org/economics/vertical/macro.html.ÌÓ  ÓÌÌò òÌThe€Microsoft€Monopoly:€A€Case€StudyÌÌó óòòMicrosoft€&€the€FTCÌÓ X ÓóóIn€1990,€the€FTC€began€an€investigation€into€the€possibility€that€Microsoft€and€IBM€were€conspiring€together€to€monopolize€the€operating€systems€market.€In€an€interview€with€Fortune€magazine,€Gates€claimed€that€in€actuality,€Microsoft€and€IBM€were€in€stiff€competition€with€one€another€at€the€time.ÌÓ  ÓÓ X ÓAs€part€of€the€investigation,€the€FTC€began€soliciting€documents€from€opponents€of€Microsoft,€and€Gates€says€his€company€paid€little€attention€to€the€investigation.€Therefore,€the€testimony€of€Microsoft's€direct€competition€was€the€only€one€the€FTC€heard,€so€the€government€began€forming€a€one€sided€opinion€of€the€issues€from€the€beginning.ÌÓ  ÓÌòòMicrosoft,€the€DOJ,€&€the€Consent€DecreeóóÌÓ X ÓNext€the€Department€of€Justice€took€up€the€investigation€against€Microsoft.€In€July€1994,€Microsoft€signed€a€consent€decree€saying€they€would€not€require€computer€manufacturers€to€license€any€other€product€when€they€sign€a€license€for€Windows.€Microsoft€is€quick€to€point€out€that€the€decree€also€explicitly€protects€Microsoft's€right€to€develop€integrated€software€products.ÌÓ  ÓÓ X ÓMicrosoft€was€at€the€time€developing€a€new€version€of€Windows€that€closely€integrated€Internet€Explorer€features,€and€bundled€a€working€version€of€the€web€browser€with€the€operating€system.€The€DOJ€began€investigating€Microsoft's€licensing€practices€14€months€after€the€release€of€the€first€version€of€this€operating€system,€and€the€allegations€uncovered€didn't€go€to€trial€until€more€than€2€years€later,€much€too€late€for€Microsoft€to€remedy€its€design€so€that€Internet€Explorer€would€not€be€so€closely€tied€to€the€operating€system.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓIn€October€1997,€the€DOJ€filed€a€petition€with€the€US€District€Court€saying€Microsoft€was€in€contempt€of€the€consent€decree€because€it€offered€the€license€for€Windows€only€if€computer€manufacturers€also€agreed€to€license€Internet€Explorer€as€well,€and€offered€no€version€of€Windows€without€the€browser€included.ÌÓ  ÓÓ X ÓThe€DOJ€asked€the€court€to€issue€an€order€that€would€prohibit€Microsoft€from€forcing€computer€manufacturers€to€accept€and€install€the€code€that€Microsoft€distributed€at€retail€as€Internet€Explorer€3.0.ÌÓ  ÓÓ X ÓMicrosoft€claimed€that€without€the€files€that€constituted€Internet€Explorer,€Windows€would€not€boot€or€function€properly.€Essentially€the€DOJ€was€ordering€that€Microsoft€produce€and€market€a€non„functioning,€and€therefore€commercially€worthless€operating€system.€Also,€it€said€that€the€fact€that€Windows€needed€the€code€to€function€properly€proved€that€Internet€Explorer€was€integrated€with€Windows€and€thus€protected€by€the€consent€decree.ÌÓ  ÓÌòòMicrosoft€&€the€Preliminary€InjunctionóóÌÓ X ÓJudge€Jackson€denied€the€request€for€a€contempt€finding,€which€would€mean€Microsoft€was€guilty€of€a€crime,€but€issued€a€preliminary€injunction€which€adopted€precisely€the€language€that€the€DOJ€had€requested€in€a€ruling.€This€basically€meant€Microsoft€was€guilty€of€no€crime,€but€was€issued€a€court€order€that€forced€them€to€begin€distributing€Microsoft€Windows€without€Internet€Explorer€included.ÌÓ  ÓÓ X ÓIn€an€attempt€to€comply€with€the€preliminary€injunction,€Microsoft€sent€a€letter€to€computer€manufacturers€informing€them€that€they€need€not€license€and€install€Internet€Explorer€with€Windows.€They€offered€them€two€new€licensing€options,€in€which€they€could€either€install€the€most€recent€version€of€Windows,€then€delete€all€the€files€that€constituted€Internet€Explorer€(creating€an€operating€system€that€was€at€best€buggy,€and€perhaps€inoperable),€or€install€an€earlier€release€of€Windows€without€the€Internet€Explorer€1.0€which€was€shipped€with€it€(creating€an€obsolete€version€of€Windows€roughly€equivalent€to€the€original€August€95€release€of€Windows€95).ÌÓ  ÓÓ X ÓAt€the€same€time€Microsoft€filed€an€appeal€of€the€preliminary€injunction,€which€was€heard€by€the€Washington€D.C.€court€of€appeals.ÌÓ  ÓÌòòThe€Preliminary€Injunction€CaseóóÌÓ X ÓIn€December€1997,€the€DOJ€asked€the€District€Court€to€find€Microsoft€in€contempt€of€the€preliminary€injunction,€saying€that€MS€had€not€complied€with€the€ruling,€because€it€offered€only€obsolete€and€unreliable€alternatives€to€the€Windows/Internet€Explorer€bundle,€which€were€commercially€worthless.ÌÓ  ÓÓ X ÓMicrosoft€said€the€suit€was€a€complete€about€face€of€the€DOJ's€stance€during€the€previous€trial.€The€government€asked€the€Judge€to€order€Microsoft€to€release€a€version€of€Windows€with€most€of€the€Internet€Explorer€code€included€so€that€the€features€that€had€suffered€in€Microsoft's€new€licensing€options€would€be€returned€to€functionality,€but€with€the€visible€means€of€accessing€it€(such€as€the€Internet€Explorer€icon€on€your€desktop)€hidden€from€view€so€the€end€user€does€not€have€access€to€it€directly.€Microsoft€said€this€marked€an€admission€by€the€government€that€Internet€Explorer€had€been€closely€integrated€with€Windows€95.ÌÓ  ÓÓ X ÓMicrosoft€is€quick€to€point€out€that€when€the€government€was€trying€to€prove€that€Internet€Explorer€was€a€completely€separate€product€from€Windows,€they€repeatedly€pointed€to€the€early€releases€of€Windows€95,€before€the€integration€of€Internet€Explorer,€when€Internet€Explorer€was€kept€on€a€separate€disk€from€Windows.€This€was€essentially€what€Microsoft's€answer€to€the€court€order€wasð"ðreleasing€this€original€version€minus€the€Internet€Explorer€disk.€Now€the€government€said€that€this€was€not€good€enough.ÌÓ  ÓÓ X ÓMicrosoft€also€points€out€that€the€DOJ€expressly€stated€in€court€during€the€first€contempt€hearing€relating€to€the€consent€decree€that€simply€removing€the€visible€means€of€accessing€Internet€Explorer€(such€as€the€desktop€icon)€would€effectively€achieve€much€of€the€government's€objectives€in€the€case,€but€they€told€the€court€that€this€was€not€the€remedy€they€sought.€They€explicitly€stated€that€they€wanted€the€entirety€of€the€Internet€Explorer€code€removed.€Thus,€had€Microsoft€done€as€the€government€was€now€suggesting€in€the€first€place,€they€would€not€have€been€in€compliance€with€the€court€order.ÌÓ  ÓÓ X ÓThe€government€said€that€Microsoft€was€trying€to€rewrite€the€preliminary€injunction,€but€Microsoft€alleged€the€same€thing€of€the€government.€When€the€DOJ€was€arguing€for€the€injunction,€they€said€it€was€a€blatant€violation€of€the€consent€decree€to€force€any€manufacturer€to€install€any€portion€of€the€Internet€Explorer€software€on€their€new€PCs.€Now€they€were€saying€that€compliance€with€the€order€demanded€that€Microsoft€distribute€Windows€with€most€of€the€code€left€in.ÌÓ  ÓÓ X ÓThe€court's€order€also€said€nothing€about€hiding€or€restricting€access€to€the€browsing€software.€According€to€Microsoft,€the€DOJ€was€asking€the€court€to€alter€the€preliminary€injunction€while€the€appeal€process€was€still€incomplete.€In€the€1978€Deering€Milliken,€Inc.€v.€FTC€case,€the€court€ruled€that€it€was€outside€the€jurisdiction€of€the€district€court€to€alter€its€own€ruling€while€that€ruling€was€still€under€appeal.€Microsoft€said€that€the€case€therefore€had€no€merit.ÌÓ  ÓÓ X ÓThe€DOJ€also€suggested€that€while€Microsoft€had€arguably€complied€with€the€letter€of€the€injunction,€they€had€ignored€the€spirit€of€it.€The€DOJ€said€that€the€ruling€was€meant€to€force€Microsoft€to€offer€the€most€current€version€of€the€Windows€operating€system€without€the€inclusion€of€Internet€Explorer,€and€with€no€other€functions€of€the€operating€system€affected.ÌÓ  ÓÓ X ÓMicrosoft€says€that€the€DOJ's€new€interpretation€speaks€in€terms€of€product€development,€whereas€the€injunction€spoke€in€terms€of€licensing€practices,€as€did€the€consent€decree€it€was€meant€to€uphold.€Furthermore,€Microsoft€cited€legal€precedents€that€say€civil€contempt€can€only€be€found€if€the€prosecution€can€find€absolute€proof€that€the€offender€violated€a€"clear€and€unambiguous"€prohibition€or€restriction€placed€on€it€by€the€court.€This€does€not€describe€the€"spirit"€of€the€ruling,€so€the€government's€case€again€had€no€merit.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓThe€case€was€never€resolved€in€a€courtroom,€however.€In€January€1998€Microsoft€reached€an€agreement€with€the€DOJ€that€effectively€put€Microsoft€in€compliance€with€the€injunction€and€ending€the€contempt€case,€meanwhile€leaving€the€injunction€open€to€appeal€and€letting€the€case€before€the€appeals€court€continue.ÌÓ  ÓÓ X ÓThe€agreement€forced€MS€to€offer€two€new€licensing€options,€both€of€which€left€most€of€the€Internet€Explorer€functionality€in€the€operating€system€while€removing€some€portion€of€the€web€browsing€software€or€the€visible€means€of€accessing€it,€just€as€the€DOJ€had€been€asking€the€court€to€order.ÌÓ  ÓÌòòMicrosoft's€Appeal€of€the€Preliminary€InjunctionóóÌÓ X ÓOn€May€5,€1998,€Microsoft€motioned€that€the€appeals€court€stay€Judge€Jackson's€ruling€as€it€applied€to€the€upcoming€Windows€98€operating€system,€on€the€grounds€that€the€court€had€not€heard€any€evidence€relating€to€Windows€98,€only€to€Windows€95.€The€Appeals€Court€granted€this€stay€on€May€12,€ensuring€that€the€release€of€Windows€98€on€June€25€would€not€be€affected€by€the€court€proceedings.ÌÓ  ÓÓ X ÓIn€reaction,€federal€and€state€officials€filed€several€parallel€suits€in€an€attempt€to€block€the€release€of€Windows€98.€In€the€first€court€appearance€on€May€22€the€judge€ruled€that€there€was€no€need€to€seek€the€injunction€against€Windows€98€that€was€suggested€by€the€DOJ.€The€judge€also€ruled€that€the€suits€filed€by€the€statesðð€attorneys€general€would€be€merged€with€the€DOJ€case.ÌÓ  ÓÓ X ÓOn€June€23,€1998,€a€three„judge€panel€for€the€US€Court€of€Appeals€ruled€unanimously€to€overturn€Jackson's€injunction,€saying€Microsoft€had€demonstrated€sufficiently€that€Internet€Explorer€was€integrated€with€the€Windows€operating€system€and€thus€protected€under€the€consent€decree,€and€that€that€integration€had€benefited€consumers.ÌÓ  ÓÓ X ÓThis€ruling€could€have€been€the€end€of€the€case€against€Microsoft,€but€the€ongoing€investigation€by€the€government€had€uncovered€the€grounds€for€another€antitrust€lawsuit,€based€on€claims€of€a€monopoly€in€the€PC€operating€system€market€and€leveraging€of€that€monopoly.ÌÓ  ÓÌòòMisconduct€Issues€in€US€v.€Microsoft€Antitrust€TrialóóÌÓ X ÓThe€most€recent€antitrust€action€taken€against€Microsoft€is€the€trial€taking€place€in€Washington€State.€This€trial€is€based€on€evidence€of€antitrust€violations€uncovered€by€the€DOJ€and€FTC€investigations€that€have€been€taking€place€since€1990.ÌÓ  ÓÓ X ÓOne€of€the€issues€in€this€trial€is€so„called€"Vaporware."€It€is€alleged€that€Microsoft€releases€information€on€upcoming€products€early€in€an€unfair€attempt€to€convince€users€to€wait€for€their€product€release,€rather€than€purchasing€a€competitor's€product.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓA€much€thornier€issue€is€that€of€bundling€applications€with€Microsoft's€Windows€operating€system€without€increasing€the€price.€This€issue€has€been€the€source€of€contention€and€litigation€since€the€mid€1990's€investigation€by€the€DOJ.ÌÓ  ÓÓ X ÓThe€prosecutors€say€that€by€bundling€applications€for€which€their€is€a€separate€commercial€market,€such€as€web€browsers,€Microsoft€gains€an€unfair€competitive€advantage€in€these€commercial€markets,€and€drives€other€producers€out€of€business.€This€is€evidenced€by€the€fact€that€before€the€bundling€of€Internet€Explorer€with€Windows,€Netscape's€browser€had€80%€of€the€market€for€web€browsers,€but€after€years€of€Microsoft€employing€this€aggressive€marketing€tactic,€their€share€had€dropped€to€as€low€as€about€30%.ÌÓ  ÓÓ X ÓMicrosoft€advocates€prefer€to€think€of€these€applications€as€"features,"€and€defend€the€action€of€bundling€them€with€the€OS€as€mere€product€improvement.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓAnother€issue€is€the€aggressive€tactics€Microsoft€employed€in€threatening€to€remove€support€for€competitor's€products€from€their€Windows€operating€system,€and€withholding€technical€information€about€Windows€from€competing€developers.ÌÓ  ÓÓ X ÓIn€1995,€Intel€developed€a€technology€called€Native€Signal€Processing€that€could€have€completely€changed€the€software€industry.€Microsoft€responded€by€warning€then€CEO€Andy€Grove€that€it€would€cut€support€for€Intel€chips€from€Windows.€Intel€promptly€stopped€development€on€NSP.€At€one€point,€Microsoft€threatened€to€cancel€development€of€its€Office€line€of€products€for€use€on€the€Macintosh€operating€system€because€Macintosh€had€made€Netscape€its€default€browser.ÌÓ  ÓÓ X ÓMicrosoft€also€withheld€vital€technical€details€that€delayed€Netscape's€release€of€a€new€browser.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓAnother€major€issue€in€the€case€is€Microsoft's€price€policies€for€distributing€windows€to€computer€manufacturers.€Compaq€once€signed€an€agreement€with€AOL€to€replace€the€MSN€icon€(Microsoft's€internet€provider)€with€an€AOL€one€on€all€its€desktops.€Microsoft€threatened€to€withdraw€Compaq's€Windows€license,€claiming€this€as€an€infringement€of€their€Windows€copyright,€and€Compaq€reversed€its€decision.€In€return€for€its€loyalty,€Compaq€now€pays€less€than€other€computer€manufacturers€for€Windows.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓSeveral€other€allegations€have€been€raised€of€Microsoft's€anticompetitive€practices.€Among€them,€they€may€have€offered€Intuit,€another€ISP,€a€bribe€to€coerce€them€to€switch€browsers€from€Netscape€to€Internet€Explorer.€They€also€made€an€agreement€to€place€an€AOL€icon€on€the€desktop€of€all€Windows€computers€in€exchange€for€AOL€switching€to€the€Internet€Explorer€browser,€and€began€scrutinizing€AOL's€dealings€to€make€sure€they€were€remaining€loyal€and€not€promoting€competitor's€products€(especially€Netscape)€in€any€way.ÌÓ  ÓÓ X ÓFinally,€it€is€alleged€that€Microsoft€licensed€the€Java€language,€designed€to€run€on€any€computer€platform,€and€produced€its€own€"polluted"€version€of€Java€that€would€only€run€on€the€Windows€platform€in€an€attempt€to€undermine€the€multiplatform€nature€of€the€language,€which€was€perceived€as€a€threat€to€Microsoft's€domination€of€the€OS€market.ÌÓ  ÓÌÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòLegal€Issues€in€US€v.€MicrosoftÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔóóÔ€XXXÔÔS€ô\  `&Times New RomanSÔÔ'  ÔÌMarket€PowerÌÓ X ÓThe€first€issue€that€must€be€decided€in€the€case€is€that€of€market€power,€and€monopoly.€Microsoft's€Windows€operating€system€controls€80%€of€the€market€for€desktop€computer€operating€systems,€and€90%€of€the€market€for€PCs€(IBM„compatible€desktops).€That€is,€essentially,€a€monopoly.ÌÓ  ÓÓ X ÓAlso,€it€is€relatively€undisputed€that€Microsoft€holds€a€tremendous€deal€of€market€power.€There€are€two€markets€in€question€here.€There€is€the€physical€product€market€of€computer€operating€systems€and€the€innovation€market.€Basically€the€concept€is€that€firms€are€considered€to€produce€innovation,€or€technological€development,€along€with€their€actual€tangible€products.€If€market€power€is€achieved€in€either€market,€and€this€market€power€is€exercised,€the€result€is€thought€harmful€for€consumers.ÌÓ  ÓÓ X ÓIf€market€power€is€exercised€in€a€market,€the€result€is€increased€prices€and€decreased€output,€because€without€competition€the€firms€seek€to€gain€the€most€profit.€The€way€to€do€this€is€to€produce€less€and€sell€it€at€a€higher€price.€In€an€innovation€market€the€result€is€less€innovation,€which€is€harmful€to€the€consumer.ÌÓ  ÓÓ X ÓÌÓ  ÓEntryÌÓ X ÓMarket€power€is€considered€harmless€so€long€as€it€is€kept€in€check€by€the€concept€of€entry.€Theoretically,€even€an€absolute€monopoly€must€remain€competitive€as€long€as€the€possibility€exists€that€a€new€firm€might€enter€the€market€to€offer€new€competition.€If€the€possibility€does€not€exist,€possibly€as€a€result€of€the€anticompetitive€practices€a€monopolist€employs€to€maintain€his€monopoly,€the€monopolist€is€free€to€do€as€he€pleases€in€terms€of€output€and€prices.ÌÓ  ÓÓ X ÓThe€possibility€of€entry€is€assessed€by€examining€"barriers€to€entry,"€conditions€which€exist€that€would€tend€to€discourage€entrepreneurs€that€would€otherwise€enter€a€market€and€offer€the€monopolist€competition.ÌÓ  ÓÓ X ÓThe€government€says€that€barriers€to€entry€are€rampant€in€the€current€software€industry,€and€cites€Microsoft's€misconduct€as€the€source€of€many€of€them.€According€to€the€DOJ,€everyone€who€becomes€a€significant€competitor€to€Microsoft€is€in€effect€defeated€by€Microsoft's€unfair€business€practices.€This€is€alleged€to€have€harmed€the€consumers,€who€suffer€substandard€innovation€and€higher€prices€for€software.ÌÓ  ÓÓ X ÓMicrosoft€says€that€entry€is€always€possible€in€a€free€capital€market,€one€in€which€mergers€are€not€impeded.€A€joint€venture€by€several€weak€firms€can€easily€erode€the€market€share€of€an€abusive€monopolist.€This€fact€makes€entry€a€necessity,€market€power€a€moot€point,€and€any€monopoly€inherently€short€lived.€Opponents€of€antitrust€legislation€cite€the€same€argument€when€claiming€that€the€only€permanent€monopoly€is€one€endorsed€and€defended€by€the€government,€such€as€a€public€utility.ÌÓ  ÓÌLeveragingÌÓ X ÓThe€government€is€also€trying€the€case€on€the€grounds€of€leveraging,€a€rather€disputed€legal€issue.€Leveraging€is€the€use€of€monopoly€power€in€one€market€to€gain€advantage€in€another€market.€The€government€claims€that€Microsoft€has€repeatedly€used€its€monopoly€of€the€operating€system€market€to€gain€unfair€advantage€in€the€software€market.ÌÓ  ÓÓ X ÓIt€is€worth€noting€that€this€definition€does€not€explicitly€state€that€the€offending€firm's€intention€be€to€create€a€monopoly€in€this€second€market.€Simply€gaining€an€unfair€advantage€is€sufficient€to€make€this€claim.ÌÓ  ÓÓ X ÓLeveraging€has€been€considered€a€violation€of€section€2€of€the€Sherman€Act€since€US€v.€Griffith€in€1984.€Section€2€makes€any€person€who€monopolizes€or€attempts€or€conspires€with€others€to€attempt€to€monopolize€guilty€of€a€misdemeanor€(this€was€later€changed€to€a€felony).€In€Berkey€Photo,€Inc.€v.€Eastman€Kodak€Co.,€the€courts€ruled€that€leveraging€was€also€in€violation€of€section€1€of€the€Sherman€Act,€which€makes€illegal€any€contract,€conspiracy,€or€combination€in€restraint€of€trade,€when€the€case€involved€bundling€the€product€that€has€achieved€monopoly€concentration€with€the€one€that€has€not.ÌÓ  ÓÓ X ÓThe€circuit€courts€are€deeply€divided€over€the€issue€of€leveraging,€however.€Some€have€found€that€an€attempt€at€monopolization€of€the€second€market€is€requisite€in€accusing€a€firm€of€a€violation€of€this€nature.€Other€decisions€denied€that€this€is€even€a€self„sufficient€antitrust€violation,€and€that€it€can€be€used€only€to€supplement€some€other€offense.ÌÓ  ÓÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòThe€AOL€„€Time€Warner€Merger:€Microsoftððs€Ray€of€Hopeò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔThings€were€looking€bleak€for€Microsoft€until€AOL€merged€with€Time€Warner.€This€addition€to€the€AOL„Netscape„Sun€alliance€created€a€$350€million€competitor€to€Microsoft.€Microsoft€cited€this€as€proof€that€they€did€have€competition€and€the€unavoidable€possibilities€of€entry€and€swift€creation€of€meaningful€competition.€The€existence€of€these€things€made€the€case€a€moot€point.€It€also€served€as€evidence€of€Microsoft's€earlier€assertion,€that€the€software€market€is€so€dynamic€that€any€monopoly€is€inherently€short€lived.Ô'  ÔÌÓ  ÓÓ X ÓOne€area€of€competition€the€two€will€most€certainly€be€engaging€in€is€the€broadband€market.€This€is€the€emerging€market€for€high„speed€internet€access€via€cable€and€satellite.€After€AT&T€merged€with€the€cable€company€MediaOne,€Microsoft€invested€$5€billion€in€AT&T€stock,€and€set€up€a€deal€to€provide€them€with€10€million€set€top€internet€boxes€preloaded€with€a€stripped€down€version€of€Windows.€In€response,€AOL€made€a€deal€with€Direct€TV€to€offer€satellite€dish€based€internet€access€to€7€million€customers.ÌÓ  ÓÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòFindings€of€Factò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔJudge€Jackson€said€that€Microsoft€failed€to€identify€a€common€market€in€which€AOL€was€a€significant€competitor€on€equal€footing.€As€a€result,€he€continued€as€planned€with€his€Findings€of€Fact,€which€was€completed€around€November€1999.Ô'  ÔÌÓ  ÓÓ X ÓThe€findings€say€that€Microsoft€has€monopoly€power€over€the€operating€system€market€for€PCs€and€desktop€computers,€which€is€not€in€itself€illegal.€They€also€say€that€Microsoft€has€used€that€monopoly€to€engage€in€anticompetitive€practices,€which€is€illegal,€and€that€these€anticompetitive€practices€harmed€consumers€by€stifling€innovation€and€raising€prices,€further€incriminating€Microsoft.ÌÓ  ÓÓ X ÓThe€findings€go€into€detail€as€to€the€violations€and€anticompetitive€practices€that€Microsoft€was€found€to€be€engaged€in.€This€provides€the€factual€basis€for€further€individual€lawsuits€by€competitors€and€for€the€major€antitrust€judgment€to€come.€They€did€not,€however,€provide€a€remedy€plan,€which€is€analogous€to€a€sentence€in€a€criminal€trial,€or€even€declare€Microsoft€guilty€of€any€violations€of€law.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓMicrosoft€admits€the€Findings€of€Fact€do€paint€an€unflattering€picture€of€the€company.€Their€response€is€that,€even€if€the€Findings€are€assumed€to€be€flawless€(which€Microsoft€contends€they€are€not)€they€do€not€describe€an€abusive€monopolist.€They€describe€a€fiercely€competitive€company,€which€has€driven€innovation,€if€by€no€other€means€then€by€being€completely€unbeatable€in€the€market,€so€that€the€only€means€of€effectively€competing€with€them€was€by€outdoing€them€with€superior,€innovative€new€technologies.€They€say€their€actions€may€seem€unfair,€but€were€completely€lawful€and€did€result€in€innovation€and,€ironically,€increased€competition.ÌÓ  ÓÌÌòòConclusions€of€LawóóÌÓ X ÓAfter€Judge€Jackson€issued€the€Findings€of€Fact,€the€next€step€in€the€legal€proceedings€was€the€Conclusions€of€Law.€The€Conclusions€of€Law€are€based€on€the€information€contained€in€the€Findings€and€what€was€brought€out€during€the€case,€and€they€describe€how€the€actions€of€the€defendant€are€interpreted€by€the€courtð"ðwhether€they€are€legal€or€not,€and€why.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓJust€as€with€the€Findings€of€Fact,€Microsoft€got€to€propose€their€own€conclusions€of€law,€as€did€the€government,€to€aid€the€judge€in€drawing€up€his€own.€Microsoft€filed€their€proposed€Conclusions€of€Law€on€January€18,€2000.€In€the€document,€Microsoft€assumes€that€the€Findings€of€Fact€aren't€flawed€and€present€a€reasonable€picture€of€Microsoft's€actions€and€how€they€affected€the€consumers.€Microsoft€does€not€believe€the€Findings€do€this,€but€their€Conclusions€show€that€even€if€they€do€present€a€reasonable€picture,€Microsoft€believes€the€Findings€do€not€constitute€an€antitrust€violation.ÌÓ  ÓÓ X ÓOne€allegation€Microsoft€addresses€in€their€Proposed€Conclusions€is€that€Microsoft€foreclosed€Netscape€from€distribution€in€several€channels,€including€that€of€distribution€on€new€computers€and€distribution€bundled€with€internet€service€provider€software.€Microsoft€said€that€while€they€may€have€made€it€difficult€for€Navigator€to€be€distributed€in€these€ways,€it€was€still€distributed€on€22%€of€all€new€PCs€and€its€usage€actually€increased€significantly€during€the€period€Microsoft€had€allegedly€foreclosed€its€distribution.€Furthermore,€Microsoft€cites€the€1998€Omega€Environmental€case€that€defended€competitors'€rights€to€sell€directly€to€consumers,€develop€alternative€distributors,€and€compete€for€existing€distribution€channels.ÌÓ  ÓÓ X ÓAlso,€Microsoft€defends€the€restrictions€it€places€on€computer€manufacturers'€ability€to€modify€windows.€Microsoft€says€that€when€it€comes€down€to€it,€Windows€is€copyrighted.€Unauthorized€changes€in€the€content€of€a€copyrighted€work€constitute€infringement€of€that€copyright.€Microsoft€asserts€that€they€have€every€right€to€place€conditions€on€the€licensing€of€their€products.€Also,€they€cite€the€1976€Gilliam€v.€ABC€case,€which€ruled€that€it€is€illegal€to€distribute€only€parts€of€a€copyrighted€work€without€permission.ÌÓ  ÓÓ X ÓMicrosoft€also€addressed€the€allegations€that€Microsoft€holds€a€monopoly€over€PC€operating€systems€and€has€turned€to€unfair€means€to€maintain€that€monopoly.€The€market,€as€defined€by€the€DOJ,€that€Microsoft€is€alleged€to€hold€a€monopoly€over€is€too€small,€says€Microsoft.€By€defining€the€relevant€market€to€include€only€PC€operating€systems,€you€eliminate€many€of€the€major€competitors€to€the€Windows€platform,€including€all€of€the€competitors€that€the€DOJ€alleges€Microsoft€harmed€in€order€to€maintain€its€monopolyð"ðSunððs€Java€and€Netscapeððs€Navigator€are€not€operating€systems,€they€are€a€programming€language€and€a€web€browser,€respectively,€and€Intelððs€Native€Signal€Processing€isnððt€even€software€at€all,€but€a€processor€technology.ÌÓ  ÓÓ X ÓFurthermore,€Microsoft€points€out€that€the€existence€of€a€monopoly€also€requires€that€the€monopolist€hold€the€power€to€restrict€output€and€control€prices,€neither€of€which€they€claim€to€have.€And,€even€if€a€monopoly€does€exist,€Microsoft€says€they€have€no€incentive€to€misbehave€in€the€traditional€way.€An€operating€system€is€only€as€good€as€the€programs€developed€to€run€on€it,€and€the€only€way€to€attract€developers€to€a€platform€is€by€creating€a€common,€open€environment.€The€best€way€to€do€that€is€to€produce€abundant€amounts€of€a€cheap€platform€and€distribute€technical€information€freely€to€developers.ÌÓ  ÓÓ X ÓThe€Proposed€Conclusions€of€Law€also€deals€with€the€allegations€that€Microsoft€illegally€tied€their€Internet€Explorer€web€browser€to€several€internet€providersðð€software€and€to€the€Windows€operating€system.€Microsoft€is€quick€to€point€out€that€their€agreements€with€competitors€do€allow€them€to€distribute€some€Netscape€software,€and€were€of€relatively€short€duration,€allowing€their€partners€to€change€allegiances€after€the€agreements€ran€out.ÌÓ  ÓÓ X ÓMicrosoft€also€points€to€a€legal€precedent,€the€1973€Telex€Corp.€v.€IBM€case,€in€which€the€court€ruled€that€when€one€product€is€in€question,€the€courtððs€business€is€not€to€dissect€that€product€and€bind€it€back€together€under€an€imagined€tying€agreement.€Microsoft€asserts€that€their€Windows€/€Internet€Explorer€amalgam€is€a€single€product€and€that€the€two€are€entirely€integrated.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓDespite€Microsoftððs€defense,€Judge€Jackson€sided€again€with€the€DOJ€and€the€Conclusions€of€Law€rendered€by€Jackson€are€similar€in€spirit€and€in€form€to€the€governmentððs€Proposed€Conclusions.ÌÓ  ÓÌÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòProposed€Remediesò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔThe€Findings€of€Fact€and€Conclusions€of€Law€left€open€the€necessity€to€seek€a€remedy€for€the€situation.€There€are€two€types€of€remedies€in€antitrust€casesð"ðstructural€and€behavioral.Ô'  ÔÌÓ  ÓÓ X ÓStructural€remedies€involve€restructuring€the€offending€firm€in€a€way€that€destroys€its€monopolistic€advantages€and€restores€fair€competition€to€the€relevant€market.€Structural€remedies€often€take€the€form€of€breakups,€in€which€the€firm€is€separated€into€several€competing€firms.€The€remedies€can€also€take€the€form€of€what€is€called€a€firewall,€in€which€the€individual€divisions€of€the€company€are€barred€from€cooperating€or€sharing€information€with€one€another.€This€doesn't€necessarily€mean€breakup€must€take€place,€but€often€firewalls€are€put€in€place€between€the€firms€resulting€from€a€breakup.ÌÓ  ÓÓ X ÓBehavioral€remedies€involve€government€regulation€of€the€offending€firm€for€a€period€of€time.€Often€the€firm€is€forced€to€sign€an€agreement€saying€they€will€not€engage€in€the€anticompetitive€practices€that€got€them€in€trouble€the€first€time,€and€the€government€watches€them€carefully€to€make€sure€the€agreement€is€upheld€in€practice.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓThe€first€proposed€remedy€is€behavioral.€The€government€could€force€Microsoft€into€a€consent€decree€saying€they€would€never€again€engage€in€the€anticompetitive€practices€they€have€been€accused€of,€then€spend€years€regulating€them,€at€great€expense€to€the€government€and€intrusion€to€Microsoft.€Besides€the€hassles€of€government€regulation,€the€biggest€argument€against€this€solution€is€that€it€has€failed€before.€Microsoft€signed€a€consent€decree€in€1994,€and€the€government€claims€they€have€failed€to€uphold€this€agreement€since.ÌÓ  ÓÓ X ÓAnother€proposed€remedy€is€structural.€Microsoft€could€be€cut€vertically,€creating€several€companies€that€develop€and€produce€their€own€versions€of€the€entire€Microsoft€product€line,€including€both€Windows€and€applications.€A€firewall€would€be€placed€between€the€companies,€barring€them€from€cooperation€for€a€number€of€years,€enforced€by€government€monitoring.€The€problem€here€is€that€the€end€result€is€likely€to€involve€recombination€of€the€companies€under€the€most€competitive€one€(most€likely€the€one€that€Gates€is€in€charge€of),€which€ends€us€back€where€we€started.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓWith€a€90%€market€share€in€the€PC€operating€system€market,€Windows€has€arguably€become€the€standard€platform€for€development€of€software€for€home€users.€Most€of€Windows'€competitors€in€this€market€are€for€special€applications€such€as€engineering€or€computerized€graphics,€with€Windows€in€near€absolute€dominance€of€the€home€market.€This€might€justify€the€type€of€regulation€currently€reserved€for€public€utilities.€In€effect,€you€keep€Microsoft's€monopoly,€but€make€it€a€public€one€rather€than€a€private€one.ÌÓ  ÓÓ X ÓPerhaps€better€still€is€a€plan€that€would€create€a€standards€board€of€industry€representatives.€All€the€current€internet€standardsð"ðhtml,€css,€xml,€ftp,€tcp/ip,€etc.ð"ðare€maintained€in€this€fashion€by€the€W3C.€The€W3C€debates€changes€to€these€standards€and€publishes€specifications€that€describe€the€features€supported€under€the€most€current€standards€and€the€ways€in€which€applications€that€claim€compliance€with€these€standards€must€behave.€For€example,€a€web€browser€that€claims€compliance€with€HTML€4.0€must€support€all€the€features€described€in€the€specification€for€that€standard.€Writing€standards€specifications€for€Windows€would€be€quite€a€task,€but€describing€all€the€API€functions€that€must€be€supported€would€allow€other€competitors€to€enter€the€market€with€their€own€operating€systems€without€risking€incompatibility€with€existing€applications€or€forcing€Microsoft€to€release€their€actual€source€code.€Furthermore,€it€would€allow€representatives€from€the€entire€industry€to€take€part€in€defining€the€specification,€rather€than€just€one€company.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓRecent€developments€in€the€nature€of€software€development€seem€to€make€Microsoft's€domination€in€the€industry€unsure€(more€on€this€later€in€Too€Little€Too€Late?).€Some€would€say€this€makes€the€case€a€moot€point.€Still€others€say€that€the€very€idea€of€antitrust€law€is€flawed€to€begin€with.€The€end€result€of€these€assumptions€is€that€we€should€simply€ignore€the€violations€and€let€Microsoft€go€unpunished.ÌÓ  ÓÓ X ÓWe€cannot€simply€ignore€violations€of€the€law.€It€is€contrary€to€common€sense€and€the€constitution€to€selectively€uphold€legislation€and€punish€violations.€History€has€shown€that€when€violations€of€the€law€go€unpunished,€especially€in€high€profile€cases,€the€result€is€a€loss€of€public€respect€for€the€law€and€the€legal€system.€Besides,€there€are€alleged€victims€to€be€considered€here.ÌÓ  ÓÓ X ÓAntitrust€legislation€is€set€up€such€that€private€suits€can€be€filed€by€the€firms€who€are€hurt€by€the€anticompetitive€actions€of€monopolists.€At€the€very€least,€punishment€should€include€this€sort€of€action,€so€that€the€alleged€victims€of€Microsoftððs€actions€can€have€their€fair€chance€at€justice€in€a€court€of€law.€The€downside€is€that€those€claiming€to€be€injured€by€Microsoft€are€many,€and€indeed€many€of€the€private€lawsuits€filed€against€Microsoft€are€being€dismissed€as€frivolous.€The€combination€of€so€many€hurting€businesses€and€a€scapegoat€with€deep€pockets€and€a€bad€reputation€preceding€him€(a.k.a.€Microsoft)€would€result€in€a€flood€of€time€and€money€consuming€lawsuits,€with€the€legitimate€barely€distinguishable€from€the€frivolous.ÌÓ  ÓÌÓ X ÓAmong€the€behavioral€remedies€under€particular€consideration€by€the€government€is€the€release€of€the€Windows€source€code,€or€at€the€very€least€the€release€of€the€secret€API€functions€Microsoft€has€written€into€the€operating€system.€The€government€alleges€that€Microsoft€uses€these€functions€in€their€own€applications,€but€does€not€make€them€available€to€competing€developers,€giving€Microsoft€applications€a€clear€advantage.€Furthermore,€this€would€take€away€one€of€Microsoft's€weapons,€withholding€Windows'€technical€details€from€competitors,€as€it€is€alleged€to€have€done€to€Netscape.ÌÓ  ÓÓ X ÓAnother€behavioral€remedy€under€serious€consideration€would€curb€Microsoft's€alleged€unfair€pricing€practices€for€Windows.€Microsoft€would€have€to€publish€a€price€list€that€would€apply€to€all€computer€manufacturers,€regardless€of€their€relationship€with€Microsoft.ÌÓ  ÓÓ X ÓMicrosoft€would€also€be€barred€from€bundling€applications,€such€as€Internet€Explorer,€for€which€there€is€a€separate€commercial€market,€without€an€accompanying€"commercially€reasonable"€price€increase.€To€ensure€this,€they€would€go€before€the€DOJ€when€they€plan€to€add€features€to€Windows,€and€the€price€increase€would€be€decided€by€a€pricing€formula.ÌÓ  ÓÓ X ÓThe€major€structural€remedy€under€consideration€would€be€a€horizontal€cut€of€the€company€into€several€smaller€companies.€Each€would€take€a€small€portion€of€the€product€line€of€the€current€Microsoft,€continue€its€development,€and€be€its€sole€producer.€The€resulting€firms€would€be€barred€from€cooperation€and€communication,€as€ensured€by€government€monitoring,€i.e.€a€firewall€would€be€placed€between€the€resulting€firms.ÌÓ  ÓÓ X ÓThis€would€seem€to€do€nothing,€as€Windows€would€still€hold€a€monopoly€of€the€PC€operating€system€market.€It€would,€however,€maintain€the€simplicity€in€that€market€of€having€90%€of€all€PCs€being€compatible.€Furthermore,€as€the€company€that€got€Windows€would€most€likely€produce€nothing€else,€they€would€have€no€other€market€in€which€to€leverage€their€monopoly,€preventing€many€of€the€alleged€anticompetitive€practices€from€being€repeated.ÌÓ  ÓÓ X ÓMany€of€the€remedies,€especially€the€structural€ones,€would€be€put€on€hold€until€the€appeals€process€is€complete.€For€example,€if€Microsoft€is€restructured€before€the€appeals€are€exhausted,€and€then€the€appeal€is€successful,€it€would€mean€two€disturbances€due€to€restructuringð"ðone€to€tear€Microsoft€apart,€and€another€to€sew€it€back€together.€Also,€once€the€Windows€source€code€is€released,€it€cannot€exactly€be€taken€back;€the€damage€will€already€be€done.ÌÓ  ÓÓ X ÓFor€this€reason,€and€believing€the€appeals€process€to€be€dangerously€slow,€the€DOJ€is€proposing€some€weaker€yet€immediate€restrictions€on€Microsoft's€behavior.€Among€them,€Microsoft€would€publish€a€price€list€that€would€apply€to€all€computer€manufacturers,€effective€immediately.€As€such,€Microsoft€would€be€unable€to€penalize€computer€manufacturers€for€actions€that€would€harm€Microsoft's€market€share,€such€as€loading€rival's€software€on€their€computers.€ÌÓ  ÓÌÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòThe€Final€Judgmentò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔThough€Judge€Jackson€rejected€Microsoftððs€proposals€for€both€the€Findings€of€Fact€and€the€Conclusions€of€Law,€they€were€still€asked€to€put€together€a€proposed€final€judgment,€which€Jackson€would€use€with€the€DOJððs€proposal€to€aid€in€rendering€his€own€final€judgment.€For€the€proposed€judgment,€Microsoft€was€forced€to€assume€that€everything€in€the€Findings€and€Conclusions€was€accepted€as€truth,€and€come€up€with€remedies€for€the€court€to€impose.Ô'  ÔÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓMicrosoft€filed€their€proposal€on€May€10,€2000,€along€with€their€objections€to€the€governmentððs€plan,€which€included€not€only€breakup,€but€also€the€release€of€the€source€codes€for€Windows.€Microsoftððs€plan€paid€more€attention€to€their€intellectual€property€rights,€protected€their€copyrights,€and€shied€from€structural€remedies,€in€favor€of€behavioral€ones.€Among€them€were€restrictions€to€Microsoftððs€ability€to€cancel€the€licenses€of€computer€manufacturers€and€place€conditions€on€the€release€of€Microsoft€software€for€other€platforms.€It€also€protected€computer€manufacturerððs€access€to€the€Windows€desktop€(assuming€they€do€not€interfere€with€the€portion€of€it€the€Microsoft€has€reserved€for€their€content)€and€forced€Microsoft€to€release€technical€details€in€the€form€of€API€functions,€not€source€code,€indiscriminately€to€all€developers,€be€they€direct€Microsoft€competitors€or€not.€Microsoft€would€also€agree€to€continue€producing€precedent€versions€of€Windows€for€two€years€after€the€release€of€a€new€version,€and€would€agree€to€allow€government€monitoring€to€ensure€compliance€with€the€court€order€and€pay€all€the€attorney€fees€of€the€states€that€were€involved€in€the€suit.€The€agreement€would€only€last€four€years.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓJackson€ruled€against€Microsoftððs€request€for€further€deliberation€and€testimony€relating€to€the€possible€consequences€of€the€governmentððs€proposed€plan,€and€on€June€7,€2000€entered€the€governmentððs€plan€without€any€significant€changes.€The€structural€remedy€in€the€ruling€would€split€Microsoft€horizontally€into€two€competing€firms.€One€would€produce€Windows,€while€the€other€produces€Microsoft's€entire€product€line,€save€Windows,€including€computer€accessories€and€applications.ÌÓ  ÓÓ X ÓA€firewall€would€be€placed€between€the€two€firms€for€a€length€of€10€years,€enforced€by€government€monitoring.€The€two€would€not€be€able€to€cooperate€or€share€developments€in€any€way€during€this€time.€This€would€effectively€remove€Microsoft's€ability€to€leverage€its€Windows€monopoly€in€other€markets.ÌÓ  ÓÓ X ÓAlso,€as€clearly€stated€in€American€antitrust€law,€Bill€Gates€would€have€to€choose€only€one€of€the€two€companies€to€hold€stock€in€and€manage.€American€law€prohibits€people€from€holding€a€controlling€interest€in€competing€firms,€especially€those€created€through€antitrust€action.ÌÓ  ÓÓ X ÓThe€behavioral€remedies€endorsed€by€Judge€Jackson's€ruling€would€be€effective€as€of€September€5,€2000.€Jackson€would€force€Microsoft€to€publish€the€technical€details€about€Windows€by€releasing€the€secret€API€functions€so€other€developers€could€take€advantage€of€them.ÌÓ  ÓÓ X ÓAlso,€Microsoft's€pricing€practices€would€be€kept€fair€with€a€published€price€list.€Further€actions€would€guarantee€the€right€of€computer€manufacturers€to€modify€Windows€in€any€way€they€see€fit€without€retaliation€by€Microsoft,€and€to€load€any€software€they€wish€on€the€computers€they€sell.ÌÓ  ÓÌÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòReactions€to€Judge€Jackson's€Rulingò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔMicrosoft€advocates€say€Judge€Jackson€failed€to€appreciate€the€dynamic€and€super„competitive€nature€of€the€software€industry.€This€nature€makes€any€dominant€position€inherently€short€lived.€They€say€any€firm€that€takes€advantage€of€its€position€to€harm€consumers€will€surely€see€its€market€power€eroded€by€new€entrants.€Entry€is€not€only€possible,€but€also€likely,€as€entrepreneurs€are€encouraged€by€an€industry€where€little€or€no€startup€costs€are€incurred,€for€no€infrastructure€is€required.Ô'  ÔÌÓ  ÓÓ X ÓFurthermore,€Microsoft€advocates€cite€the€AOL„Time€Warner€merger€as€proof€that€any€monopoly€is€under€constant€threat.€In€a€free€capital€market€(one€in€which€mergers€are€not€impeded€by€government€regulation),€combination€of€several€firms€with€little€capital€can€result€in€overnight€competition.€The€AOL€juggernaut€now€has€$350€billion€in€assets,€to€match€Microsoft's€$400€billion,€creating€more€competition€than€was€previously€imagined€possible.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓAntitrust€advocates€say€that€monopolists€threaten€the€growth,€stability,€and€prosperity€our€economy€has€enjoyed€in€recent€decades.ÌÓ  ÓÓ X ÓThey€attribute€most€of€this€prosperity€to€small€startup€firms€headed€by€ambitious€entrepreneurs€that€become€runaway€successes€(ironically€not€unlike€Microsoft€itself).€It€is€just€this€sort€of€firm€which€would€be€most€threatened€by€a€monopoly,€as€they€represent€a€possible€future€threat€with€little€present€power.ÌÓ  ÓÓ X ÓTherefore,€prosecutors€come€to€the€surprising€solution€that€breakup,€usually€thought€to€result€in€instability€in€the€market,€might€actually€accelerate€growth,€strengthen€the€economy,€and€protect€the€free€market.ÌÓ  ÓÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòPolitical€Ramificationsò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔIn€a€two„hour€interview€with€Fortune€magazine,€Bill€Gates€said€one€reason€the€actions€against€his€company€got€as€far€as€they€did€was€that€he€was€not€very€concerned€with€politics€or€damage€control€in€the€past.€He€said€business€as€usual€and€innovative€product€development€were€always€his€number€one€concern,€so€the€only€voices€the€DOJ€got€to€hear€were€those€of€Microsoft's€opponents.Ô'  ÔÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓIf€this€is€the€case,€the€situation€is€certainly€changing.€Gates€showed€the€DOJ€he€was€ready€to€play€hardball€when€he€approached€the€Clinton€administration€and€asked€them€to€cut€$9€million€in€funding€to€the€DOJ€from€the€proposed€federal€budget.€Microsoft's€new€lobbying€staff€now€includes€four€former€members€of€congress.€Also,€Microsoft€is€following€its€competitors'€example,€contributing€$1.7€million€to€the€campaigns€in€the€upcoming€election€cycle.ÌÓ  ÓÓ X ÓMicrosoft€has€found€allies€in€both€the€Senate€and€House€Majority€Leaders€(Trent€Lott€and€Dick€Armey€respectively),€and€even€Democratic€New€Jersey€Senator€Robert€Toracelli.€The€Republicans€have€recently€told€Al€Gore€they€wish€to€make€the€case€an€issue€in€the€upcoming€presidential€election.€Microsoft€has€plenty€of€reason€to€look€forward€to€the€upcoming€elections€and€buy€time€with€appeals€until€then.€If€the€pro„business€Republicans€take€the€Whitehouse,€the€DOJ€will€be€at€their€command€and€more€likely€to€settle€on€friendlier€terms.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓAt€the€same€time,€trust€busting€itself€may€get€a€great€boost€from€Jackson's€ruling.€Such€a€high€profile€case€draws€a€lot€of€attention€to€antitrust€law,€especially€when€the€DOJ€wins.€It€is€likely€that€a€string€of€antitrust€action€will€come€from€the€momentum€of€this€case.€Also,€the€DOJ€will€probably€be€on€the€prowl€for€more€high€profile€technology€targets€for€future€trials.ÌÓ  ÓÌÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòA€Little€Too€Late?ò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔGates€once€expressed€fears€that€antitrust€actions€would€block€the€release€of€Windows€98,€with€great€detriment€to€consumers,€but€now€it€is€more€likely€to€affect€the€release€of€Windows€2000.€The€investigations€that€led€up€to€this€case€began€in€1990,€and€most€of€the€allegations€are€centered€on€Microsoft's€actions€in€the€mid€90's,€around€1995.€In€high€tech€terms,€ten€years€is€several€generations€gone€by,€meanwhile€antitrust€actions€were€slowed€to€government€pace.€And€we€haven't€even€begun€the€appeals€process.Ô'  ÔÌÓ  ÓÓ X ÓMany€say€the€damage€is€done.€Others€say€the€very€direction€the€computing€industry€has€taken€in€recent€years€makes€the€entire€case€a€moot€point.€Many€people€do€agree,€though,€the€ruling€was€too€late€to€do€much€good,€and€a€few€say€that€antitrust€actions€in€the€high€tech€industries€requires€a€new€approach,€perhaps€a€new€regulatory€committee€that€has€the€power€to€keep€up€with€the€pace€of€the€industry.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓIronically,€the€case€against€the€Windows€monopoly€comes€at€a€time€when€a€mass€migration€in€the€industry€is€eroding€the€power€that€lies€in€that€monopoly.ÌÓ  ÓÓ X ÓPC's€are€being€replaced€by€the€more€mobile€computing€capabilities€of€digital€assistants.€That€market€is€cornered€by€Palm,€who€holds€79%€of€the€market,€eclipsing€Microsoft's€WindowsCE.ÌÓ  ÓÓ X ÓIt€is€not€news€that€the€computing€industry€is€also€moving€online,€where€operating€systems€are€irrelevant.€There,€Microsoft's€MSN€internet€provider€has€only€3€million€subscribers€to€match€AOL's€22€million.ÌÓ  ÓÓ X ÓEven€Microsoft€itself€has€moved€on€to€greener€pastures.€Their€newest€concern,€according€to€Gates,€is€not€Windows,€but€Next€Generation€Windows€Programming.€Microsoft's€first€step€is€to€design€a€secure,€pervasive€network€architecture€that€will€allow€applications€to€safely€run€on€servers€in€cooperation€with€devices€on€a€network.€This€will€allow€users€to€set€up€their€own€personal€home€networks,€linking€everything€from€computers€and€digital€assistants€to€set€top€internet€boxes,€wireless€devices,€and€appliances.ÌÓ  ÓÌÌÝ‚ÿÝÝ  ÝÝ‚ÿÝÔ&  ÔÝ  Ýó óòòAppeals€Processò òóóÌÔ€ôôôÔÔS€ô\  `&Times New RomanSÔÓ X ÓÔ€XXXÔÔS€ô\  `&Times New RomanSÔOn€June€13,€2000,€Microsoft€filed€their€notice€of€appeal€of€Jackson's€ruling€in€the€antitrust€case.€They€also€filed€a€motion€to€stay€the€ruling,€pending€the€resolution€of€the€appeals€process.€Had€the€stay€not€been€granted,€the€controls€and€prohibitions€set€forth€in€the€ruling€would€have€begun€on€September€5,€2000.€The€restrictions€that€would€have€begun€on€this€date€would€have€forced€Microsoft€to€release€their€source€code€and€trade€secrets€to€competitors,€interfered€with€current€product€development€and€releases,€forced€Microsoft€to€redesign€their€entire€line€of€operating€systems€within€six€months,€and€put€price€controls€on€Microsoft€products.Ô'  ÔÌÓ  ÓÓ X ÓOn€June€19€the€appeals€court€rejected€a€government€argument€that€they€had€no€jurisdiction€in€the€case,€and€the€case€should€be€fast€tracked€to€the€Supreme€Court.€They€also€set€a€fast€paced€schedule€for€hearings€on€Microsoft's€motion€for€a€stay.€The€next€day,€Judge€Jackson€granted€Microsoft€a€stay€of€his€ruling€pending€the€resolution€of€the€appeals€process,€meaning€the€restrictions€would€not€begin€in€September€unless€the€appeals€were€exhausted€by€then.€This€made€the€Appeals€Court's€schedule€moot.€Jackson€also€certified€the€case€for€expedition€to€the€Supreme€Court,€which€now€has€the€power€to€accept€the€case,€or€reject€it€and€send€it€back€to€the€Appeals€court€to€hear€it€first.€ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓThe€next€step€in€the€appeal€process€could€be€the€Washington€DC€Circuit€court.€This€is€the€same€one€that€overturned€Jackson's€ruling€in€the€suit€over€Microsoft's€bundling€of€Internet€Explorer€with€Windows€95.€The€Expediting€Act€offers€the€chance€to€fast€track€the€case€directly€to€the€Supreme€Court,€with€unpredictable€consequences€for€the€ruling.ÌÓ  ÓÓ X ÓThe€DOJ€supports€the€use€of€the€Expediting€Act€to€fast€track€the€case.€Publicly€they€say€the€high€profile€nature€of€the€case€and€its€importance€to€the€economy€and€citizens€of€the€country€demand€it,€but€they€may€have€other€private€reasons.€The€Supreme€Court€is€less€predictable€than€the€DC€Circuit€Court€and€may€offer€a€more€supportive€ruling.€However,€there€is€no€precedent€case€for€which€they€gave€a€ruling.€They€currently€seem€to€have€a€pro„business€leaning,€so€the€DOJ€has€every€right€to€be€nervous€about€the€appeal€no€matter€which€court€it€goes€to.ÌÓ  ÓÓ X ÓÌÓ  ÓÓ X ÓMicrosoft€says€that€because€of€the€broad€subject€matter€involved€in€this€case,€it€would€benefit€from€being€first€heard€by€the€Court€of€Appeals,€who€could€sort€out€the€issues€and€simplify€them€for€speedy€review€by€the€Supreme€Court,€if€such€a€trial€is€necessary.€They€also€point€out€that€in€the€last€26€years€only€two€cases€have€been€sent€to€the€Supreme€Court€by€way€of€the€Expediting€act,€and€in€both€cases€the€subject€matter€involved€was€limited€and€both€parties€consented€to€the€action.ÌÓ  ÓÓ X ÓHowever,€their€stance€is€most€likely€affected,€at€least€in€part,€by€the€upcoming€elections€and€the€possibility€of€a€friendlier€Republican€DOJ,€not€to€mention€the€friendly€precedent€ruling€by€the€Appeals€Court€in€Microsoft's€appeal€of€Jackson's€preliminary€injunction.Ô€ôôôÔÔS€ô\  `&Times New RomanSÔÌÓ  Ó