Yesterday, we witnessed an important milestone in the development of antitrust law as it applies to the information technology sector. The U.S. Court of Appeals for the District of Columbia Circuit voted 7-0 that Microsoft violated Section 2 of the Sherman Act.
That's the capital crime of antitrust. It represents as near a total victory for the Justice Department and states as could have been expected.
For some reason, Microsoft spent Thursday crowing about its victory. We can't understand why. Granted, the breakup order was vacated, but that ruling was clearly anticipated because Judge Thomas Penfield Jackson did not hold any hearings on a remedy once he issued his findings of fact and conclusions of law.
Instead, the case is being remanded for further consideration of breakup--or such other remedy as will effectively prevent Microsoft from engaging in anti-competitive practices.
The court's own words stated in the opinion, "We...remand with instructions to conduct a remedies-specific evidentiary hearing." That hearing will enable a newly assigned District Court judge to consider a number of remedies to correct the section 2 violations that have now been affirmed unanimously by the appeals court. Translation: The court has not ordered Microsoft to be set free. Instead, the District Court is being asked to consider the appropriate redress.
The U.S. Court of Appeals has now joined the Justice Department, the District Court, and most of the information technology industry in recognizing that Microsoft's business practices are not just business as usual but rather a clear and demonstrated violation of law.
On the key issues of fact, Microsoft was found to have engaged in unlawful practices. For example, the court found that the first wave agreements that required the use of Microsoft's Java Virtual Machine (JVM) are exclusionary, in violation of the Sherman Act. The court also found that "Microsoft intended to deceive Java developers and that Microsoft's conduct related to its Java development tools served to protect its monopoly of the operating system in a manner not attributable either to the superiority of the operating system or to the acumen of its makers" and therefore was anti-competitive.
Furthermore, the court found that Microsoft's threats to Intel were exclusionary.
Tightening its grip
Over the course of this trial, Microsoft has reinforced its monopoly position, on the desktop and beyond. Microsoft's pattern of behavior must be broken if we are to protect consumers and restore competition and innovation. The court recognized that the passage of time or changes in technology will not solve this problem, as Microsoft claims. Rather, it will take strong action to restore competition and deny Microsoft, as the law requires, the ability to continue to benefit from its illegal practices.
On remand, we expect the Justice Department to take the court's decision to heart and propose remedies that will prevent Microsoft from leveraging the monopoly in the Windows operating system into other products and services. In addition, the court is asking the Justice Department to explain how the remedies proposed will undo and prevent the unlawful acts. It is therefore a mistaken reading of today's opinion to conclude that structural remedies are off the table.
The court found serious and repetitive section 2 violations. The court remanded the case to a new District Court judge to consider a range of remedies. Microsoft will now get the remedy hearing that it was denied in Judge Jackson's courtroom, and justice will be served. This is wholly appropriate and welcome, and does not represent any significant kind of victory for Microsoft.