Lords of industry prepare for antitrust battle

The public policy fight for the future of the software market has begun in earnest.
Public salvos such as the reviews of Microsoft activities by the Federal Trade Commission
and Justice Antitrust Division or the barbs of politicians such as Sen. Orrin Hatch
(R-Utah) are only the visible tips of the iceberg.


The Redmond, Wash., behemoth's bundling of its World Wide Web browser with its
operating system triggered the public activities, but it could be any in a series of
Microsoft actions that touched off the brouhaha.


Microsoft is in good historical company. The old Bell system was torn down and broken
apart for public policy reasons sparked by antitrust concerns. At the heart of the
AT&T Corp. breakup was one man, the late Bill McGowan of MCI Communications Corp. He
had the vision and staying power to build the necessary political, business and legal
coalition required to cause the sea change. But no one has emerged as the McGowan in the
anti-Microsoft pile-on.


Earlier, in the late 1960s and early '70s, the government tried to break up IBM Corp.
for perceived lack of competition in the market. That company, though still intact, was
hobbled by multiyear litigation and consent decrees that limited its marketing and sales
activities.


Microsoft is not in imminent danger of being broken up by the antitrust bureaucracy.
But the bottom line appears to be that Microsoft's and Intel Corp.'s dominance of the
computing market has succeeded in scaring a fragmented and highly competitive industry
into ad hoc coalitions, which Gates might loosely label "those DAM
companies"--DAM being an acronym for defending against Microsoft.


The DAM companies are legally permitted to combine for public policy purposes in
Washington, under sanction of an exception to the antitrust laws known as the
Noerr-Pennington Doctrine. They can create joint and complementary positions to address
potentially life-threatening attacks they allege are coming from Microsoft. But Microsoft
is also in a position to use Noerr-Pennington's protected space to build its own
coalition.


Trade associations may become surrogates for either Microsoft or the DAM companies. In
choosing sides, the associations neutralize one another. So there will be an increased
need for reliance on more ad hoc coalitions. This activity goes on above and around the
companies' federal marketing efforts. Because the public policy stakes are so high, the
hundreds of millions of dollars in revenue the DAM companies get from federal customers is
secondary.


The political choices made by companies and their choices of Washington champions will
say a lot about how they view the game. For example, based on public reports, it appears
that Microsoft gets advice from tax reform proponent Grover Norquist, who has unparalleled
access to Republican House leaders. Norquist has as much a role in the ruling Republican
coalition as any nonmember.


Undoubtedly, some crossover Democrats are also on board to protect Microsoft. The DAM
companies probably have talent on both sides of the aisle as well.


Politicians looking for contributions may see advantage in prolonging or intensifying
disputes between two sets of wealthy potential corporate donors. Such actions would
confirm the observation of Treasury Secretary Oliver Wolcott, made in 1800: "The
people are poor. As far as I can judge, they live like fishes by eating each other."


Bill Gates is successful in the market thanks to his relentless drive and the clarity
of his technical vision. He must now deploy these talents in a more complex and diverse
environment.


Young FTC and Justice Department attorneys will work well into the night to get a
company or its chief executive if they believe they have been dissed--or merely
challenged. Gates may find his challengers will be more successful in the politically
charged public policy arena.


But ultimately, the debate over whether Microsoft's actions are anti-competitive will
be decided on their merits. It may not particularly matter who the Microsoft lobbyists or
mouthpieces are. The most important one is Gates himself. He has become one of the most
recognized businesspeople of all time.


Chief executives of rival companies, lacking Gates' fame, will work all the harder to
make their points to policy makers. It will be a fascinating debate, and one with
long-term implications for information technology.


Stephen M. Ryan is a partner in the Washington law firm of Brand, Lowell & Ryan. He
has long experience in federal information technology issues. E-mail him at smr@blrlaw.com.


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