The Department of Justice, nine states, and Microsoft devised a remedy that they claim will work. On the other side are eight opposing states and the District of Columbia; they say the remedy won't work and they have an alternative. To prove that point, however, the opposing states will have to paint a worst-case scenario that demonstrates that the proposed settlement does not have the teeth to prevent future monopolistic activities. Also, they'll have to demonstrate how their alternative remedy can survive that same scenario.
Enter the court jester--Sun CEO Scott McNealy. Since last summer, McNealy and other Sun executives have been on the campaign trail, describing that worst-case scenario to any audience willing to listen (Play video clip). Their interpretation positions Passport as the key to Microsoft's future monopolies.
In an interview with ZDNet, Sun Chief Strategy Officer Jonathan Schwartz elaborated on McNealy's position. McNealy sees customer information as the future leverage point. According to McNealy, Microsoft is using its current monopoly of the desktop to collect that information, to deposit it in Microsoft-run repositories, and to keep it up-to-date. A central repository of detailed and up-to-date customer information, McNealy contends, has enormous value to merchants needing access to it and to those merchants' customers, who don't want to re-enter that information for each merchant with which they do business. The value of such a repository creates a monopoly-like leverage point that-without restraint--Microsoft can exercise at will.
To access or manage that information, McNealy says, Microsoft can and will require merchants and customers to use Microsoft technology. In monopoly-like fashion, this could foreclose competition in the many markets for which Microsoft makes information access technologies: desktop computers, handhelds, set top boxes, cell phones, gaming consoles, etc. McNealy also says that Microsoft can and will charge merchants for access to that information, and customers to manage and share it (with merchants).
This sets up two of McNealy's worst-case, monopoly-like scenarios. In the first, Microsoft can set whatever price it wants on that data. In the second, carte blanche access to the customer data could create unfair advantage for Microsoft's business units in other industries, where Microsoft's competitors must pay for the data or use Microsoft technology to access it. (For example, MSN Money Central could have an unfair advantage over other financial services companies such as Fidelity.)
The technical work required by Microsoft to accomplish these scenarios would be trivial.
However, Microsoft insists that the data will not be used in any of the ways that Sun has described. In ZDNet's interview with Adam Sohn, Microsoft's .Net Platform Strategy Group Product Manager, Sohn stresses that Microsoft will not charge merchants for accessing that data or customers for sharing it with those merchants. Nor will Microsoft technologies be required to interact with the data. Furthermore, Sohn claims that Microsoft has no intention of ever selling the data, despite a paragraph in the Passport Privacy Policy that clears the way for Microsoft to do exactly that. According to Sohn, "If [Microsoft] puts up barriers to sharing the data, it would undermine the value of the new Web services model. It would destroy the dream."
This brings us back to the very essence of the remedy controversy. The question Judge Kollar-Kotelly must address is whether the remedy should be written in a way that not only prevents Microsoft from using these leverage points, but from developing these leverage points in the first place. Or can Microsoft be trusted to keep its word and play fair?
McNealy's message is that Microsoft can't be trusted. Microsoft's conduct has twice had harmful effects on Sun efforts. In the first incident, Sun sued Microsoft over an alleged violation of the Java license. Although Microsoft never admitted guilt, Sun managed to extract several concessions from the company, including $20 million, in an out-of-court settlement. The second time was when Microsoft's exclusive dealings, according to the Appellate Court's opinion in the antitrust case, "foreclosed a substantial portion of the field for Java Virtual Machine distribution, [and in doing so], protected Microsoft's monopoly from a middleware threat."
But the opposing argument from the DOJ, Microsoft, and the nine settling states has its merits, too. Writing a remedy that addresses all worst-case scenarios without effectively handcuffing Microsoft's technical innovation could be a huge if not insurmountable challenge. Eight states and the District of Columbia took a crack at it and some of their proposal's provisions (such as the one that forces Microsoft to continue licensing each desktop operating system for a period of five years after its successor is released) have serious technology, support, and cost implications that could cripple Microsoft. Crippling a company is not an objective of an antitrust remedy.
Perhaps Penfield-Jackson's restructuring remedy was more of a last resort than the lynching many have characterized it as.
What do you think? Are McNealy's fears justified? Will Judge Kollar-Kotelly be able to bring closure to this case once and for all? Should the remedy include a significant punitive element? Talkback below.
