Introduction | BasicAnalysis | Remedies | AfterEffects
Assuming that either MS is found guilty on one of the charges, or that an agreement is reached in which MS agrees to some form of remedies, what should be the goals of any remedies? From the perspective of promoting economic efficiency, what should be the goal(s) of policy in such cases in general?
The remedies fall into two broad classes - first there are those that attack the business side of MS by restricting their contracts or splitting the company along various lines of business. The second broad class attacks the control over the technology by either forcing MS to release or license the source code, or disclose proprietary information (APIs). The remedies can also be divided into those that affect conduct and those that affect structure. For example, a restriction on contracts is a conduct remedy, while a breakup is a structural remedy.
Assuming that liability is established in at least one or more part(s) of the case, when defining remedies one has to consider
Yes, if one looks forward to the final appeals decision. But, although my expectation is the same, there is much more uncertainty now than there was before the start of the trial on the final outcomes.
What remedies proposals have been made?
The following proposals have been made:
Unless MS does much better in its presentation in the second part of the trial, I expect that the District Court will find MS guilty of some of the accusations. I also expect that an across-the-board conviction is likely to be reversed by the DC Court of Appeals.
What are the pros and cons of each category of remedy?
The following table assesses the costs and benefits of each of the proposed
remedies and my assessment of the probability that each of these remedies
would be imposed and that they would be upheld on appeal. The probabilities
of the various remedies actions add to 50% because I believe that Microsoft
has a 50% probability of acquittal.
Criteria
--------- Remedies |
Proportional to conviction | Does it prevent MS from repeating the crime? | Does it help consumers? | Does it create the least interference in the rest of MS and in the industry? | Probability of remedy imposed and upheld |
Impose conduct restrictions on contracts | Easy to tailor according to the violation | Yes, if MS is convicted of anti-
competitive exclusionary contracts |
Prevents vertical effects.
Does not prevent horizontal effects. |
Yes | 30% |
Force MS to disclose APIs that allow IE to be in OS | Solves all technological bundling problems | Yes, if MS is convicted of illegally bundling IE with Windows | Prevents vertical effects.
Does not prevent horizontal effects. |
Yes | 8% |
Force MS to give away or license Windows source code | Severe remedy that takes away the intellectual property of MS | Yes, for mono-
polization. No, for other crimes |
Is likely to create incom-
patibilities and reduce consumers’ surplus. It will increase the cost of applications. |
No. Severely decreases the incentive for innovation | 5% |
Break MS according to lines of business (operating systems and applications) | Very severe remedy; dispro-
portionate to crime; its function can be accomplished by disclosure of APIs instead |
Prevents vertical effects.
Does not prevent horizontal effects. |
Unclear | No. Very significant upheaval for MS and the industry. | 5% |
Break MS in 3 identical parts | Very severe remedy; dispro-
portionate to crime; |
Yes, for mono-
polization. No, for other crimes. |
Consumers lose significantly because
of lack of compatibility.
Unlikely to result in significantly lower prices |
No. Very significant upheaval for MS and the industry. | 1% |
Break MS along lines of business and then break the operating systems division in 3 identical parts | Very severe remedy; dispro-
portionate to crime; |
Yes, for mono-
polization and bundling. No, for other crimes. |
Consumers lose significantly because
of lack of compatibility.
Unlikely to result in significantly lower prices |
Very significant upheaval for
MS and the industry.
May eliminate MS as a serious player |
1% |
If you were put in charge of the case, which proposal would you enforce?
If I was in charge, I would impose various contract restrictions.