Truth on the Market

William Page is a Marshall M. Criser Eminent Scholar in Electronic Communications and Administrative Law at the University of Florida, Levin College of Law.

The DOJ’s Section 2 Report speaks in general terms about the costs and benefits of various remedies for monopolization. It prefers “prohibitory” remedies, but holds open the possibility of “additional relief,” including “affirmative-obligation remedies. The Report specifically mentions the protocol-licensing requirement of the Microsoft final judgments (§ III.E, entered in November 2002) as an example of a challenging and controversial affirmative-obligation remedy. In this post, I’d like to comment on the protocol-licensing program and its implementation. In doing so, I draw on my previous work with Jeff Childers, particularly Software Development as an Antitrust Remedy: Lessons from the Enforcement of the Microsoft Communications Protocol Licensing Requirement, and Measuring Compliance with Compulsory Licensing Remedies in the American Microsoft Case.

Section III.E requires Microsoft to “make available” to software developers the communications protocols that Windows client operating systems use to interoperate “natively” with Microsoft’s server operating systems in corporate networks or on the Internet. The short-term goal of the provision is to allow developers to write applications for non-Microsoft server operating systems that can interoperate as easily with Windows client computers as can software written for Microsoft’s server operating systems. The long-term goal is to preserve, in the network context, the “middleware threat” to the Windows monopoly. The idea is that middleware applications running on non-Microsoft servers might become a rival platform that could erode the “applications barrier to entry” as Netscape and Java had threatened to do.

Judge Kollar-Kotelly placed special emphasis on this provision as the “most forward-looking” one in the final judgments. It was, she believed, necessary to assure that the other provisions do not become “prematurely obsolete” as computing moves to corporate networks and the Internet. In practice, however, the provision has done little to advance the goals of the decree. Equally important, as I explain below, its implementation (by two sets of plaintiffs, with the aid of a Technical Committee and technical consultant) has been Kafkaesque. Continue Reading…

William Page is a Marshall M. Criser Eminent Scholar in Electronic Communications and Administrative Law at the University of Florida, Levin College of Law.

The DOJ’s § 2 Report offers two recommendations under the heading of “General Standards for Exclusionary Conduct.” First, for evaluating alleged acts of exclusion, the Report endorses the burden-shifting framework of the D.C. Circuit’s 2001 Microsoft decision. Second, after canvassing various standards of anticompetitive effect, the Report settles on the “disproportionality test,” under which “conduct that potentially has both procompetitive and anticompetitive effects is anticompetitive under section 2 if its likely anticompetitive harms substantially outweigh its likely procompetitive benefits.”

In this post, I’d like to comment on these recommendations by recalling how the D.C. Circuit applied its burden-shifting approach in Microsoft. In doing so, I draw on The Microsoft Case: Antitrust, High Technology, and Consumer Welfare (Chicago 2007), which I wrote with John Lopatka of Penn State.

Under the D.C. Circuit’s burden-shifting approach, the plaintiff is first required to show that the defendant’s conduct harmed not only competitors but the “competitive process and [therefore] consumers.” If the plaintiff does so, the defendant must offer a procompetitive justification for the conduct, that is, “a nonpretextual claim that its conduct is indeed a form of competition on the merits because it involves, for example, greater efficiency or enhanced consumer appeal.” If the defendant produces a justification, the plaintiff is required either to refute it or to prove that the anticompetitive harm outweighs any benefit. Continue Reading…