Frame Game

Reformat C:\Microsoft?

For two years, the U.S. Department of Justice told a story in court about a big, bad company named Microsoft. In the story, the bad company bullied smaller, good companies that were trying to give consumers more choices and better products at lower prices. The bad company threatened the good companies and beat them up when they got in its way. Last November, the court decided that the story was true. And last month, the court ruled that what happened in the story violated antitrust laws. Now comes the hard part. Having sold its story, the DOJ has to say what the court should do about it and why.

Last Friday, the DOJ filed its proposed remedy for these antitrust violations. It would break the company in half and restrict how each half could behave. The remedy, as its name suggests, is supposed to address the old story. It’s supposed to repair what the bad company did to the good companies and prevent that from ever happening again. But the remedy also creates a new story. In this story, the question isn’t what Microsoft has done to others, but what the DOJ will do to Microsoft. And while Microsoft may look strong, the DOJ, having whipped Microsoft in court, now seems clearly stronger. Depending on how each observer feels about the case, he or she now sees the government either as the aggressor or as the agent of change. Either way, the DOJ is up against a long-standing law of politics: Americans don’t like aggressors and don’t trust agents of change.

The political conflicts of the past decade demonstrate how much easier it is to describe a problem than to prescribe a solution. Bill Clinton persuaded Americans that the shortage of employer-provided health insurance was a scandal. But when Clinton tried to make employers provide that insurance, he became the aggressor. Opponents made his prescription the issue, and voters turned on it. In 1994, Newt Gingrich rode the anti-Clinton backlash to power, convincing voters that Democrats had mismanaged Washington. But when Gingrich tried to reverse the Democrats’ policies and rein in the budget, he became the aggressor, and voters turned on him. In 1998, Ken Starr and the Republicans proved that Clinton had committed adultery with a White House intern and had lied under oath about it. But when they tried to throw Clinton out of office, they became the aggressors, and voters turned on them.

Microsoft will try to do to the DOJ’s remedy what Republicans did to Clinton’s health-care plan and what Democrats did to Gingrich’s Contract With America. Microsoft executives say the proposal by “government lawyers” to “tear Microsoft apart” is “extreme,” “drastic,” “radical,” “heavy-handed,” and “risky.” They warn that by making “computers less capable and more expensive,” the plan would “hurt American consumers” and deliver “a major setback” to “the high-technology industry and the American economy.” Tech stocks have collapsed since the court ruled against Microsoft last month. That collapse may be coincidental, but it has caused many investors to worry about what the government will do. Already, the DOJ’s assertion that a breakup wouldn’t hurt Microsoft’s 3 million shareholders is under fire from economists. And Microsoft says it will ask the court to make the DOJ cough up every document related to its decision to pursue a breakup. Ken Starr understands this tactic all too well. The investigator is becoming the investigated.

Microsoft’s prosecutors understand the natural biases against a breakup. Two state attorneys general who had joined the DOJ’s lawsuit have dissented from its proposed remedy. One said a breakup wasn’t necessary. The other argued that its effects were unpredictable and that a breakup, unlike restrictions on Microsoft’s conduct, couldn’t be reversed if it turned out to have been a mistake. In a Gallup Poll last month, Americans said by a margin of more than 3-to-1 that Microsoft should be left alone rather than split up.

The press, too, having cast a wary eye on Microsoft’s behavior, is now casting a wary eye on the government’s remedy. “PC Users Express Concern That Split May Hurt Them,” warned the New York Times. A Times news story called the breakup a “drastic step” and suggested that there is “reason to hesitate before reshaping the software industry by court edict.” A Washington Post editorial, cautioning that a breakup “might do more harm than good,” likened it to an “atomic bomb that cannot be undetonated.” On television this weekend, journalists pressed DOJ antitrust chief Joel Klein and his supporters to justify the breakup and to allay fears that it would create chaos for ordinary computer users.

So far, Klein has given three answers to these questions, none of them sufficient. First, he reverts from prescription to description, from the new story to the old one. When asked to justify what the government wants to do to Microsoft, he recites what Microsoft did to its competitors. This reminder strategy didn’t work for Clinton, Gingrich, or Starr, and there’s no reason to think it will work for Klein. Second, he promises that the government’s plan will give everyone more of everything. “This decree will stimulate innovation throughout the software industry,” Klein promised at a press conference Friday. “The result will be an exciting and innovative set of new products with more choices and lower prices for America’s consumers.” Clinton made the same kinds of promises about his health-care plan in 1993. He bet on hope, while his opponents bet on fear. His opponents won.

Third, Klein argues that other possible remedies are worse than this one. If the government were to restrict Microsoft’s conduct rather than break it up, he suggested Friday, “the heavy hand of ongoing government regulation” would “decide what is in the best interests of consumers. … We’re not in the business of trying to put burdensome regulation on companies or to try and get courts intrusively involved in regulating companies. We’re in the business of letting the market produce the best goods and services for consumers.” That’s a powerful argument against the remedies Klein rejected. It may turn out to be equally powerful against the remedy he chose.