Judge Sporkin: Microsoft's Unwitting Ally

On February 14, 1995, Federal Judge Stanley Sporkin refused to approve the consent decree negotiated between the U.S. Government and Microsoft to settle the antitrust complaint filed against Microsoft by the Government. Many think that this denial is a harsh blow against Microsoft. In fact, it may be very helpful to Microsoft for several reasons:

1. It started an appellate process during which Microsoft will not be bound by any decree and after which any decree might be obsolete.

2. It has caused an important adversary of Microsoft -- the government -- to become an advocate for Microsoft.

3. It may well lessen the likelihood that the Government will investigate or take enforcement actions against other Microsoft anticompetitive practices.

4. It may focus on a practice -- vaporware -- which is not illegal and which is fairly commonplace.

5. Judge Sporkin's Ruling Buys Microsoft Time

Not surprisingly, the Government immediately noticed the appeal of Judge Sporkin's ruling. The resolution of the appeal by the D.C. Circuit is likely to take six to twelve months with an additional year tacked on if the Supreme Court agrees to decide the case.

This gift of time is invaluable to Microsoft. Instead of being under a court-ordered decree, Microsoft is under no decree. Given the speed of technological development, the current decree will likely be irrelevant at the time, if ever, that it actually comes into force.

More importantly, Microsoft's economic power continues to grow unimpeded. One subject on which the Government and Judge Sporkin agree is that Microsoft dominates an "increasing returns market." In layman's terms that means that once a company has a monopoly position, it is extremely hard to dislodge it." Thanks to Judge Sporkin, Microsoft will maintain and increase this monopoly unopposed by the Government. Indeed, the Government and Microsoft have become allies appealing Judge Sporkin's ruling.

Judge Sporkin's Ruling Makes the Government a Microsoft Ally

It is not just that, as mentioned above, the Government and Microsoft are now both on the same side appealing Judge Sporkin's ruling. A deeper problem is that the Government is now more deeply entrenched in defending what many have questioned as an ineffective consent decree in the first place. For example, since Judge Sporkin began questioning the decree, the Government has filed an affidavit from a Nobel-prize-winning economist defending the decree. It is at the least ironic that Microsoft should get such substantial and free help from what was its most formidable adversary.

Lessened Possibility of Other Governmental Actions Against Microsoft

The Government is currently investigating Microsoft's $1.5 billion acquisition of Intuit and may be conducting other investigations. Oftentimes such investigations are concluded by consent decrees such as the one at issue here. Judge Sporkin's actions, however, have certainly cast a pall over the likelihood of such decrees, at least until the appellate court has ruled. No one could have any reasonable certainty that a settlement with the Government would be judicially approved.

Regarding other possible investigations by the Government, actions brought as a result of any such investigations would tend to prove Judge Sporkin right, i.e., that the proposed consent decree did not go far enough. It would not be surprising if such a prospect proved inhibiting to the Government.

Judge Sporkin's Ruling Focuses on a Practice -- Vaporware -- Which May Well Be Legal

Given the choice, surely Microsoft (or any defendant) would rather be sued about a practice that is legal rather than one which is illegal. What a wonderful gift to Microsoft, therefore, that Judge Sporkin has fastened on the practice of vaporware (product pre announcements), which may well be legal.

The practice appears to be widespread and well accepted. The Government has taken the position the "[P]roduct preannouncements do not violate antitrust laws unless those preannouncements are knowingly false and contribute to the acquisition, maintenance or exercise of market share." This is a high standard, particularly given all of the other factors that could have contributed to Microsoft's market share.

Judge Sporkin seems to acknowledge that vaporware might be legal by stating that he can prohibit lawful practices in order to pry open a market closed by illegal restraints. If Judge Sporkin gets to the point of enjoining a legal practice, it is likely that such an injunction would provide another trip to the appellate courts for review.

CONCLUSION

Although Microsoft's Chairman is reputed to be a genius, it is unlikely that even he could have created a piece of software as helpful to Microsoft as Judge Sporkin's ruling. With a stroke of the pen Judge Sporkin eliminated for all practical purposes the only successful governmental action ever taken against Microsoft and created an alliance between the Government and Microsoft. Although Judge Sporkin seems to have clear ideas about how the Government should proceed against Microsoft, the fact that Judge Sporkin is in the judicial rather than the executive branch will probably preclude those ideas from ever being acted on.