At the time, some considered it the trial of the century. The weight of the U.S. government pitted against one of the most influential companies in the world accused of abusing its power and crushing the competition.
Ten years ago the United States Department of Justice along with 20 states took Microsoft to court. Last week, many of the case’s key players reconvened at the Harvard Law School (HLS) to review the antitrust lessons learned from the landmark trial and its lasting impact on the world of high tech.
At the case’s core was the charge that Microsoft exerted monopoly power by bundling its Internet browser, Internet Explorer, with its personal computer operating system, Windows. With its substantial share of the market at the time, that practice, argued prosecutors, as well as the company’s restrictive license agreements with Internet service providers and computer manufacturers both limited consumer choice of Internet browsers and hindered competing Web browsers from breaking into the market. The actions, the government contended, amounted to anticompetitive behavior and a breach of antitrust law.
The two-day Austin Hall event (Sept. 12-13), sponsored by Harvard’s Berkman Center for Internet & Society, was like a legal/high-tech family reunion, with a slightly uncomfortable undercurrent as participants recalled the details of the case.
“If you are from Microsoft, there’s just no way to put lipstick on that trial,” said Brad Smith, Microsoft’s senior vice president, general counsel, and corporate secretary, who gave the event’s keynote address and discussed the effects of the case on the company today.
The initial decision, handed down by U.S. District Court Judge Thomas Penfield Jackson in 2000, was severe and called for the breakup of the company. But Jackson’s secret meetings with the press while the trial was ongoing were deemed inappropriate by a court of appeals and were largely responsible for its overturning his ruling. With a change of administration, the new Department of Justice ultimately agreed to settle the case, with more lenient terms for the software giant.
The ever-dynamic expert on all things cyberspace, faculty co-director of the Berkman Center Jonathan Zittrain, looked back at the case and applied some of its lessons to the state of technology today.
In his fast-paced and humorous style, the HLS professor argued that Microsoft’s ability to control the look of a computer’s desktop was at the crux of the matter.
“It’s what’s presented front and center that greatly determines what a user will do,” said Zittrain, who contended that the automatic appearance of the Internet Explorer icon on a consumer’s computer screen gave the company perhaps its greatest advantage over competitors simply by virtue of its visibility.
Zittrain warned that in today’s world, dominated by the Internet and high-powered devices of increasingly smaller scale, the lessons learned from the Microsoft decision might have evaporated. Technology, he feared, is likely headed in a much more “closed model” direction.
The problem, said Zittrain, is in the kinds of restrictive measures taken by companies like Apple that control with an iron grip the applications available on their products. Third-party programmers who want to create applications for the popular iPhone need direct approval from Apple, for example, and users who try to “jail break,” or circumvent, the system by hacking into their own device to upload unapproved applications, risk serious functionality repercussions.
Such restrictions, he worried, cultivate a “climate of fear” — one in direct opposition to an open-natured ethos.
“You may have won a battle,” he said to the audience, “but may actually lose the war.”
While the outcome of the trial struck some observers as little more than a slap on the wrist for Microsoft, the company did incur significant fines and was subject to more oversight and transparency, which, according to Smith, had a lasting impact.
The software executive said Microsoft’s greatest lesson, whether or not ultimately established legally, concerned the deeper understanding of its global impact and need for better transparency. The trial, Smith said, was a critical part of Microsoft’s maturing process.
“It was clear that the government, indeed the world, expected us to step forward and assume more responsibility … whether that was borne out in the court of law or not.”
The changes, said Smith, came in the form of better internal and external communication, frequent meetings with other industry players, a commitment to competition, and the creation of a set of guiding principles. Since 2006, he noted, the company has published a series of business practices that it promises to adhere to.
“[It was about] getting out and working it out and listening better to what people had to say and building a more relationship-based approach to dealing with a number of these issues,” Smith remarked.
In some of the event’s other sessions, lead attorney for the Justice Department, David Boies, a partner in Boies, Schiller & Flexner, reflected on his role in the process, and reporters from The Wall Street Journal, The New York Times, and The Washington Post who covered the case reviewed the media’s role in the trial.
In assessing the trial’s long-term effects, Franklin M. Fisher, Massachusetts Institute of Technology (MIT) former professor of microeconomics and an expert witness for the Justice Department during the case, may have summed it up best. He recalled that when he was asked during the trial what harm would come out of Microsoft winning the case, he’d answered, “We would live in a Microsoft World. … It might be a good world or a bad world but it would be a Microsoft-controlled world.”
“My view,” he added in Austin Hall last Saturday, “is that I was probably right. … We don’t live in this kind of world … [and] competition can be a spur to innovation.”