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Microsoft: The States' Last Hurrah
The Cato Institute ^ | November 5, 2002 | Robert A. Levy

Posted on 11/14/2002 3:57:30 PM PST by Bush2000

Microsoft: The States' Last Hurrah

by Robert A. Levy

The opinion was straightforward. "Harm to 'one or more competitors,' however severe, is not condemned by the Sherman Act in the absence of … harm to consumers." With those words, federal judge Colleen Kollar-Kotelly pinpointed the driving force behind the Microsoft antitrust suit – an attempt by Microsoft's disgruntled rivals to use government for competitive advantage.


She went on to note that the attorneys general of the nine non-settling states offered "little, if any, legitimate justification" for the remedies they requested, which, for the most part, were "not supported by any economic analysis." Why, she wondered, would the states ask for relief "at this late stage … unrelated to [Microsoft's] monopoly market." Her answer: "Certain of Microsoft's competitors appear to be those who desire these provisions."

In effect, nine states tried to replace the United States as the enforcer of federal antitrust laws – seeking broader relief than the federal settlement afforded, based solely on their different view of the public interest. And they undertook that task at the behest of companies like Sun Microsystems, which plays a major role in the high-end server market, and AOL, which dominates Internet access, and Real Player, which rules the market for multimedia software.

All of that whining and political jockeying by Microsoft's giant rivals might be just grist for an intriguing tale of corporate cronyism, except that the cost of the litigation – in time, money, and diversion of executive resources – has been enormous. Microsoft's shareholders suffered an erosion of market value measured in hundreds of billions of dollars. Indeed, Microsoft stock plummeted $80 billion on one day – April 3, 2000, when Judge Thomas Penfield Jackson issued his ill-fated conclusions of law, which were mostly overturned on appeal. Contrast that single-day loss with the mere $60 billion that disappeared from investors' and employees' portfolios in the aftermath of the Enron debacle.

Microsoft shareholders aren't off the hook yet. The company still faces an onslaught of legal action, public and private. The European Union moves forward with its own antitrust investigation. Private lawsuits are under way, brought by consumer classes as well as competitors. They can collect treble damages under U.S. antitrust laws, and they are in a much stronger position in light of the Justice Department's litigation. Because the court held that Microsoft has a monopoly in operating systems and behaved anti-competitively, private litigants - without revisiting those issues - can proceed straight to proof of injury.

Because of murky statutes and conflicting case law, companies like Microsoft can never be quite sure what constitutes permissible behavior. If the company can't demonstrate that its actions were motivated by efficiency, conduct that is otherwise legal somehow morphs into an antitrust violation. Normal business practices – price discounts, product improvements, exclusive contracting – become violations of law. Long-term, the answer is root and branch repeal of the antitrust laws that Federal Reserve chairman Alan Greenspan described more than 30 years ago as a "jumble of economic irrationality and ignorance."

In the meantime, Congress ought to strip the states of most of their authority to enforce federal antitrust laws by suing on behalf of state residents. Otherwise, some states will continue to abuse that authority – exercising it to impose sovereignty beyond their borders, cater to the parochial interests of politically powerful local constituents, and promote remedies that the federal government has expressly considered and rejected.

Here are the rules that ought to govern when states propose to vindicate the private rights of their residents under federal antitrust law: First, states should not be allowed to litigate on behalf of private parties who, on their own, have unhindered access to the courts. Second, injury claims must be those related to residents collectively or to a state's overall economy, not particular parties. That reduces the likelihood that the litigation will be instigated by special interests. Third, relief should be in the form of money damages only, not conduct remedies. The problem with conduct remedies is that they invariably affect out-of-state residents. Finally, no state should be permitted to sue if a federal agency is also suing, unless there are state-specific injuries that are not addressed in the federal suit.

The underlying principle is this: Government frequently moves forward in the name of correcting market failure, apparently without considering at all the possibility of government failure. As a result, economic losses from excessive regulation often cause immense damage to producers and consumers. The Microsoft litigation is Exhibit A.


TOPICS: Business/Economy; Front Page News; Technical
KEYWORDS: antitrust; doj; microsoft
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Nighty night, Harr.
1 posted on 11/14/2002 3:57:30 PM PST by Bush2000
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To: Bush2000
Gates could have saved himself a lot of trouble if he had just given those bags full of money to Terry MacAuliffe wayback in 95' when he was asked.
2 posted on 11/14/2002 4:08:39 PM PST by Burkeman1
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To: Burkeman1; HAL9000
Gates could have saved himself a lot of trouble if he had just given those bags full of money to Terry MacAuliffe wayback in 95' when he was asked.

No problem: Steve Jobs gave money to the DNC, instead.
3 posted on 11/14/2002 4:20:26 PM PST by Bush2000
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To: Burkeman1
Yep, but then the market wouldn't have been able to be manipulated as easy.
4 posted on 11/14/2002 4:21:13 PM PST by Ragin1
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To: Ragin1
It is funny how the Democrats talk about "the rage" the American people feel over the 401k losses under Bush. First- Democrats opposed even allowing 401ks in the first place! But a funny thing happened when millions of Americans - through 401ks- got into the stock market. They actually started to follow the markets. To read up on financial information. And what you had in this past election was a population better educated on financial matters than the Democratic leadership! The voter who has seen his 401k cut in half in the past 2 years knows very well when it started and knows why. They know the Clinton economy was a phoney bubble economy! In fact- when the Democrats talk down to voters that way, lie so egregiously- as if they are morons - they lose votes! People may not follow politics closely but they follow their money very very closely and they saw through the Democratic lies about the economy and were insulted by them. The Democrats are so out of touch it is amazing.
5 posted on 11/14/2002 4:30:32 PM PST by Burkeman1
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To: Bush2000
No problem: Steve Jobs gave money to the DNC, instead.

But Steve Jobs is Apple.

6 posted on 11/14/2002 4:34:09 PM PST by demlosers
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To: demlosers
But Steve Jobs is Apple.

No kidding. That's the point.

http://herndon1.sdrdc.com/fecimg/query.html
7 posted on 11/14/2002 4:35:17 PM PST by Bush2000
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To: Bush2000
Microsoft mgmt = liars and spin doctors.

They have repeatedly destroyed innovative new software companies with their theft of intellectual property from those companies. I docuemnted this and proved it - you came back with a "so what"?

Just like dealing with the Demoncrats, the only way to stop MSFT is to stop funding them.

8 posted on 11/14/2002 4:38:09 PM PST by ikka
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To: Bush2000; Burkeman1; HAL9000
But Steve Jobs is Apple.

No kidding. That's the point.

The point Burkman1 was trying to make is that Bill Gates didn't bribe Clintonites for protection, hence the Gov. anti-trust lawsuit against MS.

9 posted on 11/14/2002 4:41:39 PM PST by demlosers
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To: demlosers
Yes, I'm affirming his belief. The Democrats sucked money from Apple and others and, since MS wouldn't pay up, they loosed their attack dogs.
10 posted on 11/14/2002 4:45:15 PM PST by Bush2000
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To: ikka
Just like assholes yours is but one of many opnions.
11 posted on 11/14/2002 4:48:15 PM PST by cksharks
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To: ikka
Some MS competitors = Whiny Losers. Read the recent settlement ruling. Kotelly sets the record straight. In the case (Stacker) that you alleged MS to have stolen intellectual property, I also showed you that the company was reimbursed and that the jury found that the violation was not intentional. Further, I showed you that the countersuit found that Stacker had infringed on MS intellectual property rights.
12 posted on 11/14/2002 4:48:29 PM PST by Bush2000
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To: Bush2000
No company can have a bad monopoly without government intervention.

No company should be punished for making the best product at the lowest price. When a company does so, nearly everyone will buy that product. Windows and PCs were the best product at the lowest price. Ninety percent of the public responded by buying PCs with windows.

When a monopoly becomes bad is when it starts to take advantage of its customers. It increases profits by lowering quality, raising prices or both.

But when a company does that, it gets competitors who take market share.

IN 1986 IBM had 85 percent of the PC business. There was pretty good evidence that the IBM cost per PC was about $750.00 but they sold retail for $4,000.00. When Michael Dell started to compete his cost was about $1,700.00 per machine, but that Dell Retailed for $2,500.00. That competition took IBM share from 85 to less than 50 and now to under 10. Price gouging creates clones. Always has. Always will.

As Microsoft becomes more obnoxious to its customers with its very unfriendly licensing policies it will lose sales too. But that is not the big problem. The rent your software is a way to try to stave of maturity. It will not work. The gold rush is over. It can't be restarted or made into rental nuggets.

The problem as Gates well knows is maturity. An idiot can see it. In Columbus ohio there are 5 stores selling used Computers. The Microcenter Computer Super Stores are selling used computers. Names like Gateway are selling style over substance. When a used market develops and companies market looks over funtion, maturity is hear. Microsoft can not lease its way out of maturity.

It seems likely that computers are not going to be an item replaced every three years and junked. Maturity means replace it when it breaks ans can't b repaired. It becomes a cubicle. The technology is surely approaching maturity. When it gets here machines will be replaced when they wear out and the operating system will be transfered to the new one.

Sales will fall to the expansion of the economy.

If you want to see where Microsoft will be in 15 years look at RCA TVs. TV's went from 10 inch to 12, to 14 to 17 to 21 to color to maturity. It went from a new one every two years to we can't remember when we bought a new one.

If Gates goes to a total lease system, he will invite a clone that is sold and not short term leased.

Gates is trying to rent houses in a nation of home owners. Sell him short... He thinks Seattle is the USA.


13 posted on 11/14/2002 5:05:11 PM PST by Common Tator
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To: cksharks
Read up on STAC and on the Wang lawsuit against MSFT. Then come back and talk facts. Until then ...
14 posted on 11/14/2002 7:44:51 PM PST by ikka
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To: demlosers
The point Burkman1 was trying to make is that Bill Gates didn't bribe Clintonites for protection, hence the Gov. anti-trust lawsuit against MS.

I wasn't in favor of the DOJ antitrust lawsuit against Microsoft, but it was largely Microsoft's own fault. They negotiated a consent decree with Janet Reno, then they violated it. They played with fire and got burned.

In the lawsuits filed by Sun, Netscape and several other companies, I do think Microsoft is liable for damages.

For the record, Microsoft co-founder Paul Allen has donated at least $150,000 to the Democratic Party in recent years - even during the antitrust lawsuit.

15 posted on 11/14/2002 11:16:26 PM PST by HAL9000
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To: Bush2000
In the case (Stacker) that you alleged MS to have stolen intellectual property, I also showed you that the company was reimbursed and that the jury found that the violation was not intentional.

Nice spin. Let's add the facts you that so conveniently left out.

MS is not "alleged" to have stolen Stac Electronics code. They were found to have stolen code and were ordered to compensate Stac for their perfidy and to remove Stac's code from Microsoft products. The result was the MSDOS 6.22 patch.

Microsoft, upon being sued, counter-sued Stac for obtaining the evidence that Microsoft stole Stac code. That's right, in order to prove that Microsoft stole their code, Stac dissambled the Microsoft binaries. Stac didn't sell, ship or release said code, they merely used it as evidence in the suit. Microsoft said this had damaged them and counter-sued.

By the time the judgement came down, Stac had been bled dry by the suit and had laid off nearly all of their employees. Stac never recovered from the loss and pulled out of the PC market.

16 posted on 11/14/2002 11:24:52 PM PST by Knitebane
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To: Bush2000
"Harm to 'one or more competitors,' however severe, is not condemned by the Sherman Act in the absence of … harm to consumers."

Damn! She sounds like a Capitalist.

17 posted on 11/14/2002 11:27:33 PM PST by Jeff Gordon
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To: Knitebane
MS is not "alleged" to have stolen Stac Electronics code. They were found to have stolen code and were ordered to compensate Stac for their perfidy and to remove Stac's code from Microsoft products. The result was the MSDOS 6.22 patch.

That's a gross mischaracterization. MS was found to have infringed on Stac's intellectual property but it was not a willful infringment. Do you understand what that means? Probably not. It means that they didn't do it intentionally. So your assertions that they "stole" IP are just bogus, inflammatory nonsense -- like the majority of your posts. For its efforts, the court awarded Stac close to $80M.

Microsoft, upon being sued, counter-sued Stac for obtaining the evidence that Microsoft stole Stac code. That's right, in order to prove that Microsoft stole their code, Stac dissambled the Microsoft binaries. Stac didn't sell, ship or release said code, they merely used it as evidence in the suit. Microsoft said this had damaged them and counter-sued.

Stac had no right dissassemble Microsoft's code, troll. And they paid for it. The court forced Stac to fork over (I believe) $15M.
18 posted on 11/14/2002 11:35:13 PM PST by Bush2000
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To: Bush2000
That's a gross mischaracterization. MS was found to have infringed on Stac's intellectual property but it was not a willful infringment.

This is due to the fact that by the time the final statements were made in the case, Stac's ability to pay for a legal team had sunk to such a level that they could only field two lawyers, opposed to the team of thirty or so that Microsoft fielded. The flurry of paperwork that Microsoft assaulted the Stac team with buried them to the point that they could not effectively make a case.

For its efforts, the court awarded Stac close to $80M.

Which did little to make up for the nearly $500 million in loses that Stac suffered due to Microsoft stealing their code.

Stac had no right dissassemble Microsoft's code, troll. And they paid for it. The court forced Stac to fork over (I believe) $15M.

Of course, we won't talk about what rights Microsoft had to steal Stac's code, eh?

You can keep trying to dodge the facts leading up to the final result, but I'll keep calling you on it.

Microsoft used their deep pockets and huge legal team to crush Stac in the legal system instead of building their own compression code and competing on merit.

One notices that Microsoft doesn't steal from IBM, Sun or Oracle. They only steal from small companies. They don't want to worry about actually losing.

So it seems that Microsoft doesn't really compete fairly anywhere, not even in court.

19 posted on 11/14/2002 11:52:27 PM PST by Knitebane
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To: Knitebane
This is due to the fact that by the time the final statements were made in the case, Stac's ability to pay for a legal team had sunk to such a level that they could only field two lawyers, opposed to the team of thirty or so that Microsoft fielded. The flurry of paperwork that Microsoft assaulted the Stac team with buried them to the point that they could not effectively make a case.

That's rubbish. Proof?

Which did little to make up for the nearly $500 million in loses that Stac suffered due to Microsoft stealing their code.

Stac presented their losses to a jury. The jury was free to award Stac as much as they wanted. They didn't. And frankly, I consider the jury who heard the evidence at trial a lot more credible than you.

Of course, we won't talk about what rights Microsoft had to steal Stac's code, eh?

You insist on beating a dead horse. Nobody's saying that MS was right to infringe on somebody else's IP. But you're completely mischaracterizing what happened by suggesting it was intentional. It's wasn't.

Microsoft used their deep pockets and huge legal team to crush Stac in the legal system instead of building their own compression code and competing on merit.

Stac's lawyers took the case on a contingency fee basis. There was no "crushing Stac". The lawyers wouldn't get paid by Stac unless they won the case. Don't you ever get tired of your own lies?
20 posted on 11/15/2002 12:40:10 AM PST by Bush2000
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