Talking to an Internet entrepreneur a few weeks ago, I was surprised to hear him say, “Microsoft is finished. Once the government goes after you, you don’t just walk away.” Judging from the straight-up ascent of Microsoft’s stock price in the last week, it’s safe to say that the market doesn’t agree with him. And last Tuesday’s decision by the U.S. Court of Appeals, which overturned a preliminary injunction requiring Microsoft to offer Windows 95 without its Internet Explorer browser included, suggests that Microsoft may in fact walk away from its tangle with the Justice Department unscathed. But things may be a bit more complicated than that.
What was most surprising about hearing someone predict Microsoft’s demise, of course, is that essentially everyone else has been remarkably sanguine about the antitrust suit filed by Justice and by 20 different states. That’s partly a result of the aura of invincibility that now surrounds Microsoft. But it also seems to be, paradoxically, a result of the recent dramatic increase in antitrust activity by the Federal Trade Commission and the Justice Department. Just since 1995, after all, we’ve seen major mergers (including Staples-Office Depot and Lockheed-Northrop Grumman) blocked, companies forced to sell off assets before consummating deals, and major suits filed against some of the nation’s most prestigious corporations. But what we’ve also seen is that corporations have been able to comply with Justice and FTC edicts and still survive. In other words, although Northrop shareholders might disagree, finding yourself in Justice’s gunsights doesn’t seem like a recipe for complete disaster.
The problem is that none of these other cases are really applicable to the Microsoft lawsuit. That lawsuit is not an attempt to block a merger or even to challenge minor anticompetitive practices. It’s actually an attack on Microsoft’s ability to own huge shares of markets other than the operating-system market, which is why it was filed under the Sherman Antitrust Act. The number of previous lawsuits like this one is quite small: Standard Oil, U.S. Steel, J.P. Morgan, AT&T, IBM, perhaps Alcoa. And defendants have not done very well in these suits, with U.S. Steel the only clear victor. (The government dropped its suit against IBM, but only after it was clear that Big Blue was no longer the hegemonic force in the computer industry that it had been.)
Tuesday’s decision, of course, does suggest that Justice may find the going much tougher this time, although strictly speaking the Appeals Court ruling applied only to the 1995 consent decree and not to the antitrust suit (as the myriad attorneys general who appeared on television after the decision took great pains to point out). The court system is packed with judges appointed during the Reagan and Bush years, who might be expected to be unsympathetic to antitrust claims, and there certainly seems to be little public pressure in favor of breaking up or even curbing Microsoft. The parallels between Microsoft and Standard Oil have been overdrawn, to say the least. But the one thing we do know about the government is that it’s not just going to go away. Unless, of course, the young George Bush is the candidate Republicans hope he is.
Random Notes: Preposterous article in The New York Times today about Jim Cramer of TheStreet.Com, with a headline suggesting that Cramer’s activities as a hedge fund manager somehow present a conflict of interest with The Street’s reporting activities. Everyone who reads Cramer knows that he owns stocks, so what, exactly, is the problem here? What matters is whether the things he writes are right or wrong, not whether he believes enough in a stock to write about it and own it. The assumption that a person’s imagined motives for saying something are more important than the validity of what he says is the definition of sophomoric… . Rupert Murdoch wants to spin off Fox. Now all those X-Files fans can become part of the military-industrial-entertainment complex.