Oct 21, 2020 - Technology

The Microsoft case's long shadow over Google

Illustration of a close up of the Microsoft logo with a scale in the middle casting a shadow

Illustration: Sarah Grillo/Axios

Microsoft's epic battle with the U.S. government from 1997-2002, the last major federal antitrust action in tech, casts a long shadow over today's Department of Justice lawsuit against Google — but the industry landscape today is profoundly different.

The big picture: Microsoft's legal ordeal came at a moment when its old competitors, like Apple, were on the ropes, and new competitors, like Google, were just launching. The antitrust case preoccupied Bill Gates and the rest of Microsoft's leadership for years and arguably gave all those competitors the breathing room to grow toward their current success.

Yes, but: Today, if Google gets similarly distracted, it has many heavyweight competitors — including Apple, Amazon, Facebook and (still!) Microsoft — ready to seize the moment.

Flashback: Beginning in 1997, the government charged Microsoft with using its dominance in the desktop operating system market to corner the web browser market.

  • The government won in court and in 2000 a judge ordered Microsoft split into two companies. However, an appeals court unanimously overturned the order and a new administration agreed to a less punitive settlement.

The Microsoft case, like the Google suit, centered on issues like the definition of a market, the power of defaults (browsers then, search providers now), and questions of "tying" — when companies make deals with third parties that leverage their monopoly power in one realm to pursue market dominance in another.

  • Both cases involve products (browsers and search) that user don't pay for, which makes it harder to prove consumer harm by the usual yardstick of price increases.

Lessons for Google:

1. Federal antitrust cases have a way of growing over time, expanding in scope, adding additional state actions and sometimes even private suits into the mix.

2. Some of Microsoft's troubles resulted from its own combativeness. Gates' defiant testimony before Congress and the company's unwillingness to admit error or find grounds for compromise pushed the case to a more definitive judgment against the company.

  • By contrast, during the same era Intel — another market dominator — found all sorts of ways to settle with regulators when they came after it.

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