The Gazette-Justice 2

THE FINDING OF FACT
In late 1999, Judge Thomas Penfield Jackson released his Finding of Fact, a non-binding declaration of the facts of the case to that point and the first part of the two-part process which would culminate in a binding Conclusion of Law, which would have all the power of a verdict. The Finding of Fact stated that Microsoft was in fact a monopoly, and further, that its actions as such had been damaging to the buying public. This came as no surprise to observers, even those in Microsoft's camp. The news at that point was ominous for Microsoft.

Let us remind ourselves once again of Judge Jackson's background. At this stage, Jackson was in a quandary--on the one hand, the evidence presented offered him no choice but to conclude as he had, but on the other hand, he despised the remedy he was going to be forced to impose. In spite of what has since been written by Judge Jackson's critics, splitting Microsoft into two or more companies was something he wished to avoid if at all possible, and it was specifically a goal of the Justice Department to avoid a break up of Microsoft right from the outset. Unfortunately though, Microsoft's actions during the trial left the court no choice.

THE MEDIATION
Then, much to Microsoft's delight, Thomas Penfield Jackson finally ordered something that Neukom should have pursued on his own long before. On November 18, 1999, Jackson appointed a mediator to try to negotiate a settlement between Microsoft and the government and the nineteen states. That mediator was none other than Judge Richard A. Posner, the Chief Judge of the Seventh Circuit Court of Appeals in Chicago. In calling on Posner, a very highly respected judge with a strong pro-business reputation to mediate, Jackson hoped to resolve the situation without having to issue the inescapable Conclusion of Law which the government case had so soundly proven was needed.

Posner, also appointed by Reagan to the bench in 1981, was hugely qualified to act as mediator. He had authored dozens of books including some noted works on antitrust law as well as contract law and economics. However, his approach to the more human aspects of negotiation was somewhat dry and impersonal.

Ken Auletta, in an excellent article for The New Yorker magazine, labeled Judge Posner an iconoclast rather than conservative. "Like other so-called conservatives, he has said that he is in favor of narrowing the scope of the antitrust laws, abolishing the Federal Trade Commission, and eliminating prison terms for violators, but he also supported the 1984 breakup of A.T.& T." With these credentials, the two jurists most directly responsible for this case were clearly trying desperately to avoid breaking up Microsoft. In his book "Antitrust Law: An Economic Perspective", Posner states that antitrust law should devote itself exclusively to the promotion of "good monopolies". He defines "good monopolies" as those providing a positive service and a beneficial economic climate for the public. However, as Auletta points out, Posner also states that a monopoly becomes an intolerable burden on the public when "price reduction is below long-run marginal cost and made with the intent to exclude." This of course, was the crux of the case initiated by Netscape that resulted in the Consent Decree.

As negotiations got under way to reach an equitable solution for all parties, it seemed as though Microsoft had, at least, a level playing field. Indeed, in accounts of the subsequent negotiation, Microsoft seemed desirous of a settlement. By all accounts they negotiated in good faith and at considerable length. Unfortunately, the desired solution for all parties was not going to come easily. It has been suggested that Posner, not a negotiator by trade, may not have handled the players involved in such a manner as to facilitate a solution. However, there are two significant obstacles which caused the failure to reach a settlement.

Probably the single greatest hurtle in this process was that while the government's case was being handled by one team of attorneys headed by Kline, any negotiated solution would require the approval of the Justice Department and all nineteen states. There were just too many parties to the decision making process on that end of the negotiation. At points in the mediation process, several states were agreeable to the solution being negotiated while several were not. In Microsoft's defense, had the solution not been unanimously agreed upon, there was no reason to settle. In fact, if the individual states began to bring suits of their own against Microsoft, their problems would have been compounded, not resolved.

Finally, it became obvious that a settlement could not be reached. Judge Jackson extended the deadline given for the conclusion of the mediation on at least one occasion, and in general gave the parties every opportunity to settle, but to no avail. As the negotiations approached their conclusion, Posner was able to get Bill Gates to agree to what had been proposed by Klein and the government. Unfortunately the government proposals were continuously being modified and revised even as they were being negotiated. Thus as one agreement was being reached it was being changed and again negotiated and then changed again.

While it may seem obvious, it should be pointed out that one other simple factor influenced the conditions of the mediation and helped insure their failure: Microsoft had dug themselves into too great a hole during the trial phase. They were so clearly in the wrong, the evidence so overwhelmingly supported each of the government's contentions, that there was no real motivation for the parties involved in the government suit to unite behind a negotiated settlement. The government antitrust lawyers had simply to sit out the negotiations for the inevitable ruling to be handed down, one which went beyond what they were originally shooting for.

On Saturday, April 1st, the mediation process came to an end. Posner notified Jackson that a settlement could not be reached. Posner held the state attorneys general responsible for the failure of the negotiation, though he did not come out and say so in so many words. Many people believe that had Posner brought the parties together during the mediation, rather than dealing with them completely separately as he did, there would have been a chance that some trust could have been developed and a better chance for a solution would have resulted. But Microsoft might have been better served to have taken that course right from the start of the trial, so that criticism is at best, only partially valid and purely conjecture besides.

Two days later, Judge Jackson had no choice but to issue his Conclusion of Law. As everyone now knows, it concluded that Microsoft had behaved such that both consumers and competitors had been harmed. On June 7th, Jackson elected to accept the government's proposal that Microsoft be separated into two distinct companies--one would continue to develop operating systems exclusively while the other would handle all other products. During the hearing which led to this decision, Jackson seemed to favor another proposal submitted to the court which suggested splitting Microsoft up into several companies. This re-enforces the contention that Jackson felt that Microsoft could no longer be trusted to redeem themselves.

IN CONCLUSION
Few judges in the history of the United States have been subjected to such vociferous and harsh criticism subsequent to handing down a ruling. This seems unfair in light of the facts of the case when examined in an impartial manner. There is no refuting that Microsoft broke the law--it is now legal fact. While many may disagree with the restrictions placed on businesses by the Sherman Act, not the least of which would be Judges Jackson and Posner, the fact remains that it is the law, and Microsoft is not above the law. Jackson is not charged with rewriting the law, just interpreting it when needed.

After the conclusion of the proceedings, in an interview, Judge Jackson stated that had Microsoft been more forthright during the trial things might have gone differently. "It would have dispelled, to a large extent, any inference of malevolent motive. It would have disclosed that they were genuinely concerned that there might have been some merit to the allegations of improper conduct on their part...It would have gone largely to the matter of motive." This implies a reluctance to pass an inevitable sentence.

As Auletta asserts in his article: "It was, almost certainly, lack of trust in Microsoft that led Jackson to overcome his aversion to a structural remedy." However, it is only befitting that Microsoft's punishments for their misdeeds should come as a direct result of the mindset which brought them to this circumstance. Unfortunately, to this day there is no evidence that Microsoft is prepared to accept responsibility for their improper behavior.

SOURCES: