By Bill Barker (TMF Max)
May 2, 2000

Sure the story of U.S. v. Microsoft is a long, complicated, and possibly emotional tale, but a lot of it can be boiled down to some pretty simple concepts, most of which each of us got control of by the time we had learned to tie our shoes. Let's revisit a few old lessons, and see how forgetting them helped get Microsoft to where it is today.

You can't have your cake and eat it, too
One of the common defenses that Microsoft supporters vocalize is that "Microsoft isn't doing anything that its competitors don't do as well." One could dismiss this argument using the alternative, "Two wrongs don't make a right" observation (i.e., the fact that others are breaking the law is never much of a defense in our legal system). Beyond that, the argument that Microsoft is doing things in the exact same manner as its competitors, even if true, would not be a defense for Microsoft so much as additional proof of the violation of the relevant law.

In the business world, it is perfectly legal and responsible to pursue monopoly power. Indeed, it might be said that gaining monopoly power is the goal of every business. However, once having gained monopoly power, a different set of rules apply to just how a business may act. This is the "you can't have your cake and eat it too" phenomenon -- businesses are allowed quite a bit of leeway in their conduct in pursuing monopoly status, but once there, a new set of rules apply to make sure that monopoly power is not used to provide a leg up in related but separate industries.

This is the problem that Microsoft now faces. Having been judged a monopoly power (regarding operating systems for Intel-compatible PCs), Microsoft must face the fact that certain limits on its behavior now apply (which would not apply if Microsoft did not have any monopoly power). Plus, those limits are not applicable to Microsoft's competitors.

In this sense, the recent interpretation of a broken-up Microsoft as more valuable to its shareholders holds the most water. A Microsoft that is just focused on maintaining its operating systems monopoly has no worries about overstepping boundaries as far as the conduct of the applications sector goes. It might accurately be argued that we as a society desperately wish for a monopoly status for OS, as that radically simplifies the task for applications writers. A split-off Microsoft applications division is free to pursue its own monopolies -- as long as it does so without having the head start of leveraging that pursuit off of an OS monopoly advantage.

No matter how you slice the company, though, one fact remains: You can't have all the power of a monopoly and have all the freedom to act with all the power you've acquired. You can't have your cake and eat it too.

Sticks and stones may break my bones, but names will never hurt me
Microsoft's public relations efforts have been a total fiasco throughout this proceeding, and seem only to be getting worse as time goes by. The tactic, employed by Bill Gates and CEO Steve Ballmer, of calling every action of the Department of Justice "extreme," "irresponsible," "harmful to consumers," etc., is just plain idiotic. It doesn't help the Realpolitik of the case to show no contrition for past actions, and nothing but disdain for expressed motivations of the plaintiffs when the evidence presented before the court regarding Microsoft's wrongful actions was so overwhelming.

Further, blaming the government officials for doing their jobs (and doing them exceptionally well) isn't going to win it any points with either the trial court or the appellate court. To the extent that Microsoft is producing commercials and holding press events to badmouth the government lawyers, and thinking that there is a public relations element that the public can bring to bear on the outcome of the case, I'm perplexed at what the company thinks it can accomplish.

Calling people names never really helps do anything but fan the flames -- and calling people names who have the opportunity to get back at you never really helps matters.

Honesty is the best policy
There are two major areas where Microsoft has slipped on the honesty front in my opinion. As I have detailed before, it really doesn't appear that any observers took Bill Gates' deposition testimony to be fully credible. It is difficult to overstate just how crucial that perception -- whether accurate or not -- would be to a judge's finding if the judge shared in the belief that he was being lied to. It's a huge, huge mistake.

The self-righteous public relations policy of formulating everything around Microsoft's right "to innovate" is also rubbing a whole lot of people the wrong way, simply on the basis that many people consider it to be the polar opposite of the Borg-like way that Microsoft has often operated. Heck, Microsoft's internal documents support that conclusion. One internal e-mail stated: "[A]nd let's face facts. innovation has never been Microsoft's strong suite. we're much better at ripping off our competitors. For example, we did not invent either ASP [active server pages] or IE, we bought them!" (Even on the lenient scale upon which e-mail punctuation, grammar, and spell-checking is graded, this is not the most flattering thing to have appear in federal court.)

With self-proclamations like that it's no wonder that the "We must be allowed to innovate" refrain strikes so many listeners as hollow and hypocritical.

Don't put off until tomorrow what you can do today
A lot of people wonder how things ever got this far, with a breakup now a very, very real possibility. Since the case in its early conception was about Microsoft's bundling of Internet Explorer with the Windows operating system, some people think that that's really all the case should be about today. However, it was in the interest of the Department of Justice to research and prove every possible violation of monopoly power once Microsoft showed that it wouldn't even budge on the bundling issue. Microsoft could have gotten out of this case very early simply by unbundling Explorer from Windows; the decision to be intractable on even that little bit started a kind of a snowball effect in this case.

Some have likened Microsoft's stance in this case to that of somebody who is following a stock that he has decided to buy, but, much to the dismay of the prospective purchaser, the price goes up and up and up every day. The thinking on holding off from buying is that it will be cheaper later, but that never happens, and ultimately he just has to buy the stock at many, many times higher a price than would have been the case if he had acted when he first saw the value in buying.

In this regard, it appears that Microsoft may still think that there's a cheap way out -- just wait for the appeal and win there. However the expressed opinion by Gates and Ballmer that a victory at appeal is likely should be viewed as but one more opinion by a couple of people that have been remarkably off about how to handle this case from the very beginning. It is likely that the cheapest way out of this case remains settling it today. Though the price for getting out of it is very, very high, compared to what it once was, there's no particular reason to think that a settlement price won't just keep escalating.

By putting off until tomorrow what it could do today -- because there's not much question in my mind that even at this late date Microsoft could still come up with a settlement that would preserve the whole company -- Microsoft is betting an awful lot that a successful appeal will provide a virtually free way out of all this mess. Whether that's such a wise move might be judged by what kind of wisdom the company has displayed in letting things get as out of control as they have by forgetting a few simple kindergarten lessons.

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