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Wednesday, June 30, 2010

World War 3.0: Microsoft and Its Enemies

An Evenhanded Investigation of an Infamous Case

Journalist Ken Auletta’s book about the Microsoft antitrust case is not just another Microsoft-bashing diatribe. On the contrary, World War 3.0 is a remarkably evenhanded investigation of this infamous case, providing some good insights into the basis (or lack of it) of the now-nullified judicial order to break Microsoft into two companies. Unfortunately, the book doesn’t probe far enough into the villainies of the case or provide the reader with grounds for skepticism about the whole antitrust enterprise.

Auletta deals at length with what he considers to be the immaturity of Microsoft president Bill Gates. He describes in minute detail his firsthand observations of Gates’s temper and resentments—a theme that recurs throughout the book. One eventually wonders why the personality of a corporation’s CEO should be relevant to judicial decisions concerning the company’s future. In what field of law other than antitrust could executive personality traits be important?

The author also points out that the key players against Microsoft—Joel Klein, head of the Justice Department’s antitrust division; David Boies, the government’s lead attorney; Thomas Penfield Jackson, the trial judge; and even Attorney General Janet Reno, without whom the case would never have proceeded—were computer illiterate. Worse still, they had no comprehension of the computer market and contrived a ridiculously narrow definition of the market in order to justify the case—but Auletta does not discuss that important point.

The first stage of the trial, together with Judge Jackson’s Findings of Fact, received extensive attention from the press, especially on television. The government’s handlers used a three-hour Gates deposition to maximum advantage by airing snippets of it, together with carefully chosen parallel snippets of e-mails and reports of alleged meetings, to paint a picture of a rapacious, immoral, law-breaking corporation in need of a comeuppance. The radio, television, and print media hung on every word and gathered on the courthouse steps each afternoon to hear what the antitrust lawyers had prepared for them—to the point where Microsoft was in danger of being condemned in the court of public opinion long before any real court was close to a verdict of any kind. To his credit, Auletta doesn’t take up the “Microsoft is evil” chorus; he shows instead that the public image crafted by the government and Microsoft’s rivals was just a giant PR operation.

The Findings of Fact took an almost incredible turn. In effect, Judge Jackson made it plain that he believed and accepted everything the government’s witnesses had to say and disbelieved and rejected everything Microsoft’s witnesses had to say. Auletta highlights this point when he titles the chapter “Judge Jackson’s ‘Facts’” and expresses the view that “Jackson’s views about the future were not so much deduced as asserted.” It was not surprising that the judge commended Microsoft’s competitors for proposing to split the company and that he himself issued such a ruling. From the start, the case had the odor of rivals using the law to disable a competitor. The Court of Appeals subsequently chastised Judge Jackson, in some of the harshest terms to come from one court to another, for his interviews and speeches both during and after the trial, in which he likened Microsoft to criminals and mobsters.

Auletta’s book provides both lively reading and an excellent background on this (sadly) still-continuing case. What is missing, though, is any insight into the essential problems of antitrust enforcement. He seems oblivious to the economic damage that is done when government lawyers, eager to polish their reputations, gang up with covetous rivals to punish successful firms for behavior that can be called “predatory” or “monopolistic.” On the contrary, Auletta gives his readers the conventional view that following the Civil War “corporations rapidly consolidated and flaunted their wealth and power in the Gilded Age, which in turn spurred a backlash against corporate arrogance.” If he had familiarized himself with the free-market critique of antitrust, he could have written a much deeper book.

Readers of World War 3.0 will learn a lot about the minutiae of the Microsoft case, but it should definitely not be the only book one reads about it.