Commentary: Uncle Sam's Trustbusters: Outgunned--and Outmoded

The Microsoft verdict bodes ill for the future. Tech startups bullied by a giant will wait a long time--or in vain--for the cavalry to show up

The Microsoft (MSFT ) case was about more than just the software giant's misbehavior. Antitrust law itself was also on trial--and it has clearly been weakened by the outcome.

From its inception, this case was supposed to prove that trustbusting is still relevant in the Digital Age. When the Justice Dept. sued the company in 1998, it argued that the century-old Sherman Antitrust Act could be applied swiftly and predictably to police high-tech monopolies. These claims now look pretty dubious.

That's bad news for Microsoft's rivals. But the shortcomings of antitrust are likely to have broader repercussions. As the digital economy evolves, it is likely to be full of natural monopolies in hardware, software, and communications, since consumers have reason to prefer unified tech standards. The Microsoft case offers little hope that the Sherman Act will be a useful tool for regulating such emerging monopolies. "This is just the first of many similar issues that are going to arise," says Peter W. Huber, a senior fellow at the Manhattan Institute. The problem of tech monopolies "will be at the center of the regulatory debate for years to come."

One of the main aspirations of the New Antitrust was to establish widely accepted rules about how high-tech monopolies were supposed to behave. But this hasn't happened--in part because there isn't any bipartisan consensus about the dangers of monopoly power. And despite all the brainpower devoted to the matter, the courts could not resolve the main issue: What type of software can be bundled with the operating system? This question will continue to dog the tech industry as Microsoft leverages its Windows monopoly in an effort to gain ground in markets for application software, handheld devices, and Web services.

Granted, the matter of bundling is no easy problem to solve. Yet the best legal minds in the country failed to come up with even a useful intellectual framework for analyzing the issue. "If anything, the law is more confusing than it used to be," says Stephen D. Houck, a Manhattan litigator who was the lead lawyer for the states in the first phase of the antitrust trial.

That's particularly troubling because, as this case amply demonstrated, antitrust law remains much more subject to political interpretation than other fields of law. And politics are going to remain a big part of trustbusting because cases still take so long. Despite the use of imaginative procedural shortcuts, the Microsoft suit has dragged on for more than four years. The result suggests that any big antitrust defendant in the future will be able to count on stretching its cases through at least one Presidential election--and, with any luck, finding a sympathetic Administration.

Equally disturbing is the apparent inability of antitrust law to come up with effective solutions to anticompetitive behavior. Although Microsoft's foes supplied strong arguments justifying the application of the settlement to prevent anticompetitive behavior in new markets, U.S. District Judge Colleen Kollar-Kotelly was wary of doing so. But should trustbusters punish only misbehavior that is five years old? If so, the Sherman Act of 1890 is not meeting the challenge of a rapidly evolving high-tech future.

By Mike France

With Dan Carney in Washington

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