Microsoft, Google and Antitrust: Similar Legal Theories in a Different Era

The Justice Department’s antitrust case against Google centres on a crucial issue reminiscent of the case against Microsoft from 25 years ago. However, this case has distinct implications for our modern culture.

In a federal antitrust lawsuit, the Justice Department asserts that Google stands as the most dominant force among tech companies. It has leveraged its market dominance to intimidate industry partners, safeguard its monopoly, and stifle competition.

The parallels to the landmark case against Microsoft a quarter-century ago are striking. In both instances, tech giants are accused of exploiting their substantial market share to unfairly obstruct competitors from reaching potential customers. Nevertheless, as we approach the Google trial, it seems unlikely that it will garner as much attention as the Microsoft case did.

During the late 1990s, Microsoft was the singular tech giant, and its CEO, Bill Gates, was a nationally recognised figure. The Microsoft trial, which commenced in October 1998, extended for over eight months, encompassing 76 days of evidence presentation. Every major news outlet provided extensive coverage, with The New York Times diligently reporting on the proceedings.

This trial frequently delved into complex concepts such as “network effects” and “switching costs. However, The Times provided day-to-day coverage similar to the O.J. Simpson trial and the Lindbergh kidnapping trial.

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On the courthouse steps, there were daily spin classes, and Microsoft representatives argued that the government presented individual text excerpts out of context, failing to constitute evidence of anti-competitive behaviour.

Meanwhile, lawyers from the Justice Department and participating states contended that the damning testimonies spoke for themselves.

Ultimately, a federal judge found Microsoft in violation of the nation’s antitrust regulations multiple times. Although most of the ruling was upheld by an appeals court, the question of how to address the issue remained. The government’s preferred solution was to break up the company.

In the case against Google, the Justice Department references the Microsoft case and its actions in the 1990s. The government argues that “Google uses the same playbook” by illegally wielding its power in online searches, similar to how Microsoft did with its Windows operating system for PCs.

Kent Walker, Google’s head of global affairs, asserts that the Microsoft of the dot-com boom era differs significantly from today’s Google. Walker, at the time, served as the deputy general counsel of Netscape, the first company to sell internet browsing software and the primary target of Microsoft’s anti-competitive efforts.

Around 90% of personal computers ran Microsoft’s Windows software, the predominant gateway to the early Internet. Microsoft also controlled the software and services featured on Windows PC screens.

In contrast, Walker contends that Google collaborates with and compensates partners responsible for manufacturing phones, browsers, and other devices. Deals with companies like Apple and Samsung, which designate Google as their preferred search engine, are not only legal but also beneficial to consumers, offering top-notch technology and reducing costs for both manufacturers and customers.

Walker explained, “We believe that certain aspects of the Microsoft case are advantageous in our situation.” When the Microsoft trial began, the Internet was a new and exciting phenomenon, and e-commerce was emerging. It was a time before the ubiquity of portable computers. In 1999, the first BlackBerry, primarily a texting device, debuted, and the smartphone era did not dawn until 2007 with the introduction of the iPhone. During this period, most internet users relied on Windows-based machines.

Microsoft was a prominent and formidable presence, venturing beyond software. In 1996, it collaborated with NBC to enter the media industry, establishing the cable station MSNBC and the website Microsoft later divested its shares in both ventures.

Executives across various sectors were apprehensive about Microsoft’s potential actions, echoing Rupert Murdoch’s concerns. At that time, Microsoft was a more recognisable name than Google is today, firmly entrenched in search and online advertising while harnessing its software and artificial intelligence capabilities in diverse domains. Nevertheless, Amazon, Apple, Meta (Facebook), and even Microsoft, all considered “big tech” companies, have faced scrutiny in the U.S. and abroad.

The Microsoft case had a significant emotional dimension due to the stature of Bill Gates, the world’s wealthiest individual. As the stock market surged during the trial, Gates’ stake in Microsoft reached $100 billion. In 1995, an MIT researcher created a webpage called the Bill Gates Personal Wealth Clock to track his net worth.

Surveys indicated that many perceived Gates as a shrewd businessman deeply involved in steering Microsoft, particularly its internet strategy. Colleagues asserted that he viewed the government’s investigation as an assault on his life’s work.

Gates did not testify at the trial, but excerpts from his videotaped deposition were presented. During his deposition, he appeared verbose, inattentive, and forgetful. At one juncture, he seemed unfamiliar with the concept of “market share,” leading him to think that “share” was an idea he failed to grasp. Subsequently, Microsoft contended that Gates adhered to legal advice, posing narrow questions and evading broad or responsive responses. However, the judge remained unconvinced.

Sergey Brin and Larry Page, the founders of Google, played less prominent roles in this case. Although they were more active in the company’s early years, Sundar Pichai, the CEO of Alphabet (Google’s parent company), presides over Google today. Pichai is a thoughtful, soft-spoken executive who began at Google in 2004 and climbed the corporate ladder.

Despite the resemblance of the Justice Department’s legal theory to the one applied in the Microsoft case, the trial’s outcome hinges on the evidence presented to U.S. District Court Judge Amit P. Mehta in the District of Columbia.

The government has stated that its proof will not be as extensive as in the Microsoft case. Terms like “cut off Netscape’s air supply” and “piles of email with no-holds-barred language” do not carry the same weight.

The government highlights Google’s internal directive instructing employees not to use terms like “kill,” “crush,” and “block” in their emails as part of its case. The Justice Department contends that Google, having learned from the Microsoft experience, recognises the need to be cautious in its communications to avoid antitrust scrutiny.

In its lawsuit against Google, the government has borrowed extensively from the Microsoft case, as these legal strategies proved effective against Microsoft, according to William Kovacic, a law professor at George Washington University and former chairman of the Federal Trade Commission.

Following George W. Bush’s presidency, a settlement materialised between the Justice Department and Microsoft, resulting in a consent decree. This decree prevented Microsoft from entering overly restrictive contracts, enabled PC manufacturers to load and promote software from other companies, and mandated greater transparency regarding technical details. Many initially argued that the consent decree achieved little.

However, David Yoffie, a Harvard Business School professor, changed his stance over time. Today, Yoffie teaches a class on antitrust and technology, commencing with the Microsoft consent decree. He asserts that the decree introduced a host of restrictions, making it more challenging for Microsoft to target new companies that take a different approach than direct competition.

Yoffie underscores that an internet search startup with innovative technology and a unique business model reaps significant benefits from this more open environment. What is this startup’s name? Google was founded in September 1998, just one month before the Microsoft trial commenced.


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