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Justice, Or Vendetta?

Mike Hall

The announcement on Wednesday of Microsoft’s forced divestiture comes as no surprise to anyone familiar with the tech industry and the federal government. Since surpassing Lotus as the world’s largest software company in 1988, Microsoft has successfully employed an aggressive business strategy to remain its industry’s leader. Naturally, the government wants to restrict Microsoft’s growth -- not by encouraging legitimate business competition, but by suspending reality and artificially changing the rules of the game.

U.S. District Court Judge Thomas Penfield Jackson’s ruling -- influenced more by Jackson’s personal loathing of Microsoft Chairman Bill Gates’s courtroom swagger rather than by facts in the case -- leaves the behemoth’s market share prone to attack from tech scavengers.

Throughout the litigation, the government’s zeal to demonize Microsoft in the public eye remains the greatest concern. Prosecutors and bureaucrats have attempted to stifle Microsoft’s growth since the Federal Trade Commission launched the first investigation into its business practices in 1991. While forcing Lady Justice to use her sword, however, the government forgot to remove her blindfold, resulting in rulings that threaten Microsoft’s viability and computer users’ productivity.

The proposed division into a separate applications company and operating system company unfairly threatens Microsoft’s survival in two ways. The ruling strikes first by mandating artificial resource allocation. The company must plan how to divide its thousands of people, physical facilities, and patents to meet the government’s stringent guidelines within a ninety-day period.

Following that inanity, the two new Microsofts must then prepare for the immediate brain drain, as the most qualified employees leave unsatisfactory new positions for the lucrative salaries and benefits of start-up employment.

The ruling then takes aim at the two new Microsofts’ ability to compete in a changed tech industry. The greatest advantage to Microsoft’s dominance of personal computing is compatibility. File formats are rarely an issue for most computer users, since both the sender and receiver are almost certainly using Microsoft products.

The two new companies are forbidden by the ruling from developing products for each other’s systems, thus preventing both companies from becoming industry leaders. The applications company, for example, could not develop software for the operating system company’s new “Windows” system. If the new system then goes on to control nearly all of the personal computing market, the applications company will find itself with no market and could easily fail.

The public also has much to lose from the ruling. The most obvious loss is the end of easy file compatibility for businesses and individuals. Subtler losses include the frightening prospect of drops in Microsoft’s stock value. Over three million individuals and groups hold Microsoft shares, with many investment and retirement funds backed by stakes in the Redmond giant. By preventing Microsoft from industry advancement, the government threatens the futures and retirements of millions of Americans.

This year alone, Microsoft has suffered a 40 percent loss due to both government intervention and the general decline of tech concerns. While the market has not reacted adversely to the ruling, the stock looks ill-prepared for a comeback. Additionally, society benefits from Microsoft’s success through large charitable donations made by the company and its employees. MIT, incidentally, has been one of the largest benefactors of Microsoft’s success, receiving a $20 million donation from Gates for LCS and $25 million from Microsoft Research for the I-Campus project.

Before preparing its case for Microsoft’s inevitable appeal, the antitrust lawyers at the Department of Justice would be well advised to consider the practical effects of their plan. While the government may be prepared to dismantle its personal enemy, the mass of Microsoft’s customers, employees, and investors are not ready for their inevitable losses.