Remedies in the case of US v. MS

The original complaint of the U.S. Department of Justice ("USDOJ") and the various individual States against Microsoft did not specify remedies. Recently the USDOJ, the States, the Software Association, and others have discussed a variety of possible remedies. Deciding the final remedy for this case is not appropriate at this time, since the liability part of the trial has not ended, and Microsoft has not yet been found guilty of any wrongdoing. Microsoft, in fact, may be acquitted. My discussion of the remedies does not imply that I believe that Microsoft is guilty of the violations of law for which it is currently on trial.

To define remedies, Microsoft must first be found guilty of at least one or more of the accusations against it; i.e. (i) monopolization of the market for operating systems for PCs, (ii) attempting to monopolize the market for operating systems for PCs, (iii) bundling Internet Explorer with Windows, or (iv) exclusionary contract(s) with ISPs or others. Second, appropriate remedies have to be proportionate to whatever crime(s) Microsoft is found to have committed. Third, remedies also must be consistent with a strategy that prevents Microsoft from repeating whatever activity is found to be illegal in the case. Fourth, remedies have to be in the public interest and should help rather than harm consumers. Fifth, remedies should minimize other interference in Microsoft’s business, and in the business of the rest of the computer industry.

Thus, looking forward, and assuming that liability is established in at least one or more part(s) of the case, when defining remedies one has to consider (i) what specifically Microsoft is convicted of doing illegally; (ii) which specific remedies would prevent Microsoft from committing the same crime or crimes again in the future; (iii) what remedies help consumers; (iv) which of these remedies creates the least interference in the legitimate business of Microsoft and the rest of the computer industry; and (v) which remedies preserve and enhance incentives for innovation. In discussing whether or not a remedy helps consumers, one has to consider its effects on prices, on compatibility, and on variety.

The following proposals have been made:

1. Break up Microsoft according to lines of business.
2. Break up Microsoft in three equal parts, with each part containing an equal amount of each business.
3. Break up Microsoft along lines of business (operating systems and applications) and then break the operating systems division in three equal parts.
4. Force Microsoft to give away the Windows source code or license it to bidders in an auction.
5. Force Microsoft to disclose the APIs that allow it to include Internet Explorer in the operating system.
6. Impose various restrictions on the contracts that Microsoft can write with sellers of complementary goods and with competitors.

The table below gives my assessment of the probability that each of these remedies would be imposed and that they would be upheld on appeal. The probabilities do not add up to 100% because I believe that Microsoft has a 50% probability of acquittal.

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Copyright © 1999, N. Economides.