Microsoft Counsel: Our Market-Power Use Paled Against What Goes On Now

STANFORD, Calif. -- The actions that made Microsoft the target of antitrust authorities internationally didn’t compare with some of the practices of dominant technology players today, said General Counsel Brad Smith. “One can only imagine the volcanic uproar” if Microsoft had run an app store in which the company “alone would control” the software accepted for distribution and from which applications that competed with offerings by the company had been excluded, he said late Friday at an antitrust symposium hosted by Stanford Law School and the American Bar Association.

Smith didn’t name names, but his comments fit with a common view of Apple’s iTunes App Store. The New York Post this month reported the Justice Department and the FTC had been discussing which agency would look into Apple’s requirement that developers of applications for its devices use its development tools. Smith declined to discuss any other conduct by Apple or Google that might support his broader statement that there’s “quite a contrast” between practices in the news now and how Microsoft was accused by Justice and the European Commission of exploiting the power of its Windows monopoly. Apple didn’t respond to a request for comment.

The current market behavior contradicts a lesson Microsoft learned from the antitrust cases against it, Smith said: A company with monopoly power has a legal duty to “take care not to raise the barriers” to new market entrants. It’s “a good thing” that “it has become apparent to the industry” that antitrust “law applies to everyone,” Smith said. In the late 1990s, there was a belief in Silicon Valley that it applied only to Microsoft, he said. Antitrust cases often are prompted by the efforts of competitors, and nothing encourages companies to “think as objectively as possible” before pursuing accusations than the knowledge that the legal outcome they seek could end up applying to them, he said.

"We haven’t been bashful” about raising competition objections “in certain situations, and I don’t think that we should be,” Smith said. He pointed to Microsoft’s opposition to Google’s acquisition of DoubleClick and to Google’s attempted marketing partnership with Yahoo. Microsoft tries to be “thoughtful” and “balanced” in deciding its positions on competition cases, Smith said. “We don’t just think, ‘Gee, what would cause trouble for someone?'”

Smith said Microsoft’s settlements with competition authorities went too far for the good of computer users. “Uncertainty about antitrust enforcement around the world has had a bit of a chilling effect” on innovation, by his company at least, he said. Smith contrasted Microsoft’s decisions about integrating anti-spyware and antivirus software into Windows. “In both cases, the benefits to computer users are profound,” he said.

Microsoft integrated anti-spyware tools before a market for standalone software products had emerged, so the company didn’t need to worry about being accused of disrupting competitors, Smith said. But the company didn’t move as quickly in relation to the antivirus market, and “it wouldn’t be a happy day” for companies dependent on the more than $1 billion a year that the business produced if Microsoft threw in the protection with Windows, he said. His company withheld the capability for fear that antivirus vendors “were going to start marching on Washington, asking for regulatory relief,” Smith said. Meanwhile, “two-thirds of the computer users in the world don’t maintain their antivirus protection,” he said.

The distinction shows that antitrust requirements of interoperability can do harm by restricting product design, creating industry “uncertainty that in fact several circuit courts recognized in the 1970s” in relation to enforcement against IBM, Smith said. Authorities should seek antitrust remedies that reduce entry barriers without confining product design, and in the “vast majority” of cases they do, he said. Microsoft won’t necessarily abstain from raising antitrust objections to avoid encouraging product-design restrictions, “but it takes more thought” to get involved than in other cases, he said.

The structure of antitrust enforcement can create political dynamics, Smith indicated. State attorneys general “gravitated toward divestiture” as a remedy against Microsoft, and Justice for a time had to go along “or lose control of the antitrust agenda in its own country.”