Forget about Waldo. Where’s Joel? I’m talking about Joel Klein, who recently played to SRO crowds in the U.S. Court of Appeals for the District of Columbia. Klein, the head of the antitrust division of the Department of Justice was in court spearheading the department’s quest against Microsoft in order to make the world safe for consumers.
Where was Joel when Citicorp and the Traveler’s Group inked a $70 billion pact to create the world’s dominant financial services supermarket where consumers can purchase stocks, insurance and mortgages at the same checkout counter, leaving their local branch banks, insurance agencies and securities brokers in the lurch?
Where was Joel when the Justice Department approved a $1 billion merger of Cineplex Odeon and Sony Corp.’s Lowes Theatre Group creating a mega-movie chain with 2,700 screens nationwide, including nearly half the theaters in the Washington, D.C., area?
Where was Joel last month when the American Booksellers Association filed an antitrust lawsuit on behalf of more than 20 independent bookstores against Barnes & Noble and Borders, accusing the superstores of soliciting secret, illegal deals from publishers which put the independents at a competitive disadvantage and threaten their survival?
So where was Joel while all this was going on? Busy making sure that American consumers have a wide-range of internet browsers to choose from. Is this the best allocation of the Department of Justice’s considerable resources?
What are Klein and his cohorts doing with taxpayers’ money in the browser wars? They dusted off the notion of a “tying arrangement,” which derives from the 1914 Clayton Act and prohibits the sale of one product on condition that the buyer also purchase a different (or tied) product. In the Microsoft case, Klein contends that the software giant is illegally tying its popular Windows 95 operating system to its nascent internet browser. Klein convinced a federal judge to issue a preliminary injunction requiring Microsoft to make Windows 95 available without its Internet browser. Microsoft appealed and before the appeals panel, the Justice Department attempted to bolster its argument against Microsoft with Klein’s novel “two-box” theory of tying arrangements. Klein’s deputy argued with a straight face that the Windows 95 operating system and browser are two separately tied products, rather than one integrated product as Microsoft contends, because the two pieces of software were originally packaged and sold as separate products in separate boxes.
There are several fundamental flaws in the department’s case. First, there is no evidence that anyone is being coerced into taking Windows 95 only on condition that they also take Microsoft’s browser. In fact, when Microsoft, in response to an injunction obtained by the department, offered a browserless version of Windows 95 to computer manufacturers, apparently, nobody wanted it. Why should they when they can get the same product with the additional feature of Microsoft’s browser for the same price! Second, even if a Windows customer is “forced” to accept Microsoft’s free internet browser, no one is forcing him to use it. Netscape and other browsers are readily available with a click of the mouse, also for free.
As for the department’s curious two-box theory of antitrust law, this hypothesis seems to have no foundation in either law or economics. Next thing you know the government will order General Motors to recall and remove the radio and air conditioner from your Chevy Lumina since both were originally later-installed options. Say goodbye to your combination telephone and answering machine. Shoes and shoe laces? According to legal scholar Peter Huber, just about everything in it was sold by someone in a separate box first (modem, CD-Rom, fax utilities). Even Windows was an add-on to DOS. If Klein has his way, soon we’ll all be staring at a C: prompt wondering what the hell to do next.And just how is Klein assisting the consumer in his battle with Microsoft? At first, his antitrust gurus, apparently more expert at 19th Century antitrust arcana than 20th Century computer code, sought to have all traces of Microsoft’s internet browser removed from Windows 95. When they realized that doing so would make Windows 95 virtually inoperable because the products are so integrated (proving, as Microsoft stated in court filings, that “poorly informed lawyers have no vocation for software design,” government lawyers shifted gears and asked the court to require Microsoft merely to remove its browser icon from the Windows 95 desktop. The browser will still be there, of course, but it will be more difficult to find and use. “How does that help the consumers?” asked one Court of Appeals judge, responding to the government’s contention that Microsoft should be forced to distribute Windows separately from its browser.
In fact, Tuesday the appellate court sent a strong message on its intentions when it held that the preliminary injunction on appeal restricted only Windows 95 and did not extend to the soon-to-be-released Windows 98. The court emphasized that if it prevented distribution of Windows 98, it would put “. . . judges and juries in the unwelcome position of designing computers.” Hopefully, this admonition will give the Justice Department pause and it will forego its widely anticipated broader attack against Microsoft based on the Sherman Act of 1894. Then, perhaps, Klein and his contingent of attorneys can turn their attention to more pressing matters.
