History News Service

Windows and the Bench: Microsoft and the Judges

By Richard D. Friedman
History News Service

Eventually, it seems, the Supreme Court may yet decide the Microsoft case. But first, as the High Court decided on Tuesday, the case must spend several more months lower down on the judicial ladder.

The fate of Microsoft, one of the preeminent firms of the Information Age, will be decided under the Sherman Antitrust Act of 1890, a Congressional response to the problem of excessive industrial power in the Railroad Age.

The substance of the Sherman Act -- the scope of what it prohibits -- is amply flexible to meet modern conditions. But the procedures of the act, which commit antitrust decisions to the judiciary and the processes of litigation, are a misfit, a product of the era in which it was passed.

Congress passed the Sherman Act before the creation of the modern administrative state. The statute is very brief. The section involved in the Microsoft case prohibits monopolization without amplifying what monopolization means.

Congress left the job of elaborating and implementing the broad-brush statutory language to the only plausible federal officers then available -- the judges. Though since supplemented by other statutes, antitrust remains a largely judicial matter.

This is troublesome for several reasons.

First, judges are lawyers with no particular expertise in economics or the industries involved.

Second, antitrust cases, particularly big ones like Microsoft, raise major issues of national economic and industrial policy. Litigation procedures, in which one side and then the other presents its case to a largely passive fact-finder chosen essentially at random, are inappropriate for deciding such issues.

Consider just one example. Though the ultimate outcome will be determined by a higher court, the case has been deeply affected by the random choice of the trial judge, Thomas Penfield Jackson. If the name of another, less gutsy judge had been called, there might be no real possibility that Microsoft would be broken up.

Third, legal principles are the wrong basis for deciding the issues at stake in cases like Microsoft. Whether Microsoft remains intact should not be determined as a matter of legal doctrine, of what rules Microsoft has violated and of what has been done in the most closely analogous cases, but of what is best for the future of the nation.

This last difficulty is mitigated somewhat, ironically, by the vagueness of the statute, which has allowed antitrust law to ebb and flow, responding to changes in the state of the economy and of economic theory. But the law also depends on who is on the Supreme Court and in the Antitrust Division of the Justice Department, which decides whether and how to pursue a case for the government.

During the Depression, for example, antitrust took a back seat to recovery efforts. In the decades following World War II, a period of great economic confidence, antitrust enforcement was extremely aggressive -- so much so that Justice Potter Stewart famously remarked that the only common theme he could see in merger cases was that "the Government always wins."

Inevitably, reaction set in. Several factors played a role -- widespread belief that overly zealous enforcement was hampering rather than helping the economy, increased concern over American competitiveness in the world, and the ascendancy of conservative Republican administrations and an increasingly conservative Supreme Court.

The Court has emphasized efficiency and its benefits to consumers as the principal goals of antitrust. This belittles the concern of the enacting Congress with the ability of "small dealers and worthy men," as one early Supreme Court opinion put it, to survive in the market. In some settings, antitrust law has become virtually toothless.

But recently, with renewed economic confidence and a somewhat more aggressive Justice Department, the pendulum has begun to swing detectably in a more activist direction.

One of the enduring sources of tension in antitrust law is that it is sometimes hard to know why a company has won most of the business in its industry. Has it invalidly acquired or exercised market power, perhaps using power in one market to gain an advantage in another? Or has it grown to an efficient size and developed an efficient, integrated scope of operations?

This uncertainty accounts for one of the notable features of monopolization law. Since the breakup of Standard Oil in 1911, the courts have generally shied away from dissolving large monopolies; they have been afraid of destroying an operation that has been working well. (The AT&T breakup may appear to be an exception, but AT&T consented to the dissolution, which offered some improvements to its regulatory status.)

Judge Jackson has therefore bitten on a very big bullet. Now we will see what the higher courts say.

Richard D. Friedman is the Ralph W. Aigler Professor of Law at the University of Michigan Law School.

[Richard D. Friedman, University of Michigan Law School, Hutchins Hall, Ann Arbor, MI 48109. Telephone: (734) 647-1078; e-mail: rdfrdman@umich.edu.]