The Microsoft Trial June 2, 1999

Dahlia Lithwick worked for two years in a family law firm in Reno, Nev. She is writing a novel about how divorce affects children.

My morning began in a sick, dizzying flashback to Econ 101–or rather, to what I would have repressed from Econ 101 had I not dropped it. A couple of times. And so today began with Franklin M. Fisher, the first rebuttal witness for the Justice Department, putting on a little Econ for Dummies clinic. There were graphs. There was enunciating. There were rhetorical questions both posed and answered by the witness. He made a straight-faced assertion involving “the central proposition of all of Western capitalism.” Someone from among the little cadre of journalists around me wondered in a hiss whether the final would be multiple choice or essay.

After a 13-week recess, the Microsoft trial resumed yesterday, in the wake of failed settlement talks and redoubled efforts by Microsoft to build a case around the proposition that the AOL-Netscape deal last fall obviates the need for an antitrust action, since competition is obviously alive and well in the software industry. The case is wrapping up with six rebuttal witnesses remaining, three for each side, the first of whom was Fisher, whose testimony began yesterday and continued today. Fisher is the MIT economist hired by the Justice Department to make fun of Microsoft’s main economic witness, Dean Richard Schmalensee of MIT’s Sloan School of Management.

There appeared to have been some suspicion on the part of some colleagues in the press today that Slate dispatches operate under some larger Slate mandate to comment upon their wardrobes in print. I believe I put them at ease by wondering aloud which one David Boies, the main Justice attorney, might be. Oh, yes. He was the one leading Fisher through his direct.

Fisher spent much of yesterday and the first part of this morning punching holes in the credibility of Dean Schmalensee. He spent the rest of the afternoon having his own credibility poked at in a cross-examination by Michael Lacovara, the Sullivan, Cromwell attorney with whom he had already tussled earlier in the trial. At some point, a newsman beside me pointed out that Lacovara is one intense guy. It’s true. This is the guy who sat in all the seats in all the front rows of all my law school classes. I suspect he starches his teeth. He tried to discredit Fisher today by asking strings of patronizing questions: “Didn’t you think it might be important for your research to … ,” “Do you know what a [polysyllabic technical word] is?” Lacovara’s problem, of course, is that Fisher is funny. He was shticking for the judge, and the judge was cracking up. The judge even laughed at his bad jokes. He didn’t crack a smile at Lacovara’s good one. This morning, Fisher joked that he didn’t publish articles on arcane points of economic theory “for the money,” and it brought the house down. Lacovara’s attempt to make the same point about being a Sullivan, Cromwell attorney was met with stony silence.

In the midst of the snipings, I stumbled upon more empirical proof that there really are only 124 people in the world, as I located a law school buddy, Karma Giulianelli, seated right there next to Boies at counsel table, thumbing through binders of documents wider than her own head. At the morning break, we hastily resumed contact and she asked what I’d been doing since law school.

“Divorce law. In Reno. No difference really,” I replied, looking round the impressive oak courtroom at this, the antitrust trial of the century. “Bigger belt buckles.”

The substance of Lacovara’s attack on Fisher included a mind-numbing discussion of elasticity and a fair criticism of a figure Fisher had miscalculated as the selling price for PCs. There was a good deal of slap-fighting back and forth about Schmalensee’s market definition and Judge Thomas Penfield Jackson listened to every word of it. At one point, he held his water glass suspended midway between table and lip, for a full 30 seconds by my count, as Fisher postulated something. This judge is right on top of the trial.

One of the missiles Lacovara pitched at Fisher today concerned the fact that Fisher is chairman of the board of the Charles River Association, a company providing consulting services for several private firms with potential claims against Microsoft. In the little spin session out on the steps before lunch, Boies scoffed at the notion that Fisher had a conflict. He had a lot to say about a full-page ad in today’s New York Times though, an ad entitled “An Open Letter to President Clinton From 240 Economists on Antitrust Protection.” The ad was paid for by the Independent Institute, to which it would seem Microsoft contributes some funding. The letter argued that the spate of antitrust suits being filed are short-circuiting the workings of the markets, and urges that “consumers did not ask for these antitrust actions–rival business firms did.”

Which brings me to this whole troubling issue of the consumer. And it’s hard not to think of the consumer at least a little bit when you are sitting in a vast courtroom, watching a spectacle paid for largely by your own taxes, on the one hand, and increased costs for Microsoft products on the other (whether that’s due to long- or short-term price-fixing behaviors I leave to Franklin Fisher to discern).

So I am sitting here and fretting about the consumer.

Because I was given to understand that antitrust policy was sort of predicated on the best interests of the consumer. And yet Fisher–in a rush to un-say something he had said earlier in the trial, when he testified that consumers haven’t been harmed “up to this point” by Microsoft’s anti-competitive actions–attempted to convince us that antitrust law isn’t “directly” about protecting consumers, but rather about “harm to competition.” When Judge Jackson jumped on the point and asked him to clarify whether he meant competition was good for consumers as meaning end-users or original equipment manufacturers, he replied that OEMs act as “representatives” of the consumer.

And suddenly, we were in a strange parallel world, where Netscape and AOL were our agents and defenders in the war against monopolies. And big businesses would all begin to act in our best interests because competition–and not the customer–is always right. Is there a world in which competition serves as its own end? Is there a universe in which the competition may be right but the consumer wrong? The consumer has all but disappeared from this trial anyway. But today he was drop-kicked right on his head.

Click here   for dispatches from the last session of the Microsoft trial between October 1998 and February 1999.