Judge Bork's Legal Assessment of How Microsoft Has Violated Antitrust Law

(April 21, 1998)  Most of the allegations to date that Microsoft has violated antitrust laws have centered on the notion that it has engaged in illegal and anti-competitive tying arrangements.  The anti-Microsoft crowd's newest lawyer/lobbyist, Judge Robert Bork, has written that tying arrangements are not anti-competitive.  This may be some indication that Microsoft's opponents will switch their theory as to how Microsoft is violating antitrust laws.

The original suit brought by the Department of Justice (DOJ) in 1994 alleged that Microsoft tied the sale of its operating systems to original equipment manufacturers (OEMs) to the sale of its applications, such as Word.  In the 1995 Consent Decree, Microsoft agreed not to tie the sale of non-integrated applications to the sale of its operating systems.  The DOJ alleged in October of 1997 that Microsoft had violated this agreement not to tie, by conditioning the sale of Windows 95 on the installation of Internet Explorer.

On April 20, Judge Robert Bork entered the fracas on the anti-Microsoft side.  He has been hired by Netscape, and has announced that he will work to get the DOJ to bring a new antitrust action against Microsoft.

Robert Bork formerly practiced antitrust law, taught antitrust law at Yale Law School for nearly twenty years, and wrote what is perhaps the most influential book on antitrust law in recent decades.  (The Antitrust Paradox: A Policy at War with Itself, New York, Basic Books, Inc., 1978.)

One thing is peculiar about this new development.  Bork wrote in his opus major on antitrust law that there is nothing anti-competitive about tying agreements, and they should not be the subject of antitrust actions by the Department of Justice!

"Antitrust cases on the topic of tie-in sales and reciprocal dealing are at once instructive and disheartening.  A review of these cases reveals the sterile circularity of the law's reasoning, the untenability of its premises, and the error of its most assured pronouncements.  These matters have been repeatedly and conclusively demonstrated by a number of commentators, yet the law remains majestically impervious to any critical analysis.  ...  Antitrust treats them both as utterly pernicious, despite the increasingly obtrusive fact that it has found no adequate grounds for objecting to them at all.  (Page 365.)

Indeed, Bork devotes an entire chapter of his book to attacking and ridiculing the very notion that any tying agreements are worthy of a DOJ antitrust action.

"They simply do not threaten competition, as the courts have supposed for so long.   ... A review of the cases and the economics of tying and reciprocity, then, leads inescapably to the conclusion that the law in this field is unjustified and is itself inflicting harm upon consumers.  (Pages 380-381.)

So why is the venerable Judge Bork working for Netscape, and not for Microsoft?

To begin with, Judge Bork's analysis, as outlined at the April 20 meeting, made no mention of the theory of tying.  He never mentioned other allegations about illegal tying.  He did not say that the Court in the present case should rule against Microsoft.  And, he did not discuss his prior work on tying agreements.

According to Bork, Microsoft has violated the Sherman Antitrust Act.  However, he bases his argument against Microsoft on the much more obscure theory that Microsoft has engaged in "refusals to deal".  This theory is backed up by just over two pages of his 462 page book, and only one very old case, Lorain Journal Co. v. United States, 342 U.S. 143 (1951).  The federal Courts today rarely rely on antitrust cases that are more than a few decades old, in part because judicial interpretation of antitrust law has evolved so much in recent decades.

Bork's 1978 description of the case is as follows:

In some ways, individual refusals to deal are more difficult to analyze than boycotts.   Present law leaves the individual firm free to refuse to deal with others, unless the refusal is intended to support another illegal restraint or constitutes an attempt to monopolize.  The presumption of freedom seems appropriate to a free market economy.   Indeed, that presumption should be broader than it is, since, as already argued, many practices the law bans should be lawful.

Problems arise primarily with respect to monopolization by refusal to deal, since it is often hard to distinguish such cases from lawful demands for exclusive dealing arrangements.  Two cases that may usefully be contrasted are Lorain Journal Co. v. United States and Packard Motor Car Co. v. Webster Motor Car Co.  They reach opposite results, both seem clearly correct, and yet it is rather difficult to articulate the distinction between them. 

In Journal, a newspaper published in Lorain, Ohio, "enjoyed a substantial monopoly in Lorain of the mass dissemination of news and advertising, both of a local and national character."  It had a 99 percent coverage of Lorain families.   "Those factors," the Supreme Court said, "made the Journal an indispensable medium of advertising for many Lorain concerns."  In 1948 the beginnings of a challenge to the Journal's monopoly arose with the establishment of radio station WEOL in Elyria, Ohio, eight miles south of Lorain.  The publisher responded by refusing to accept local advertisements in the Journal from any Lorain County advertiser who advertised over WEOL.  The Supreme Court had no difficulty in perceiving an attempt to monopolize, illegal under Section 2 of the Sherman Act, in this refusal to deal.  (Pages 344-5.)

Bork also pointed in this 1978 book that "Antitrust has long attempted to deal with boycotts and with refusals to deal, but it has developed no satisfactory theory with respect to either."  (Page 330.)

However, Bork states in 1998 that this Lorain case presents a clear and satisfactory theory.   Moreover, it is exactly analogous to Microsoft's situation.

Bork wrapped up his analysis as follows:

"I think that the parallel between the Journal's behavior in that case, and Microsoft's behavior here is exact.  Microsoft has a similarly overwhelming market share.  And it imposes conditions on those with whom it deals to exclude rivals without any apparent efficiency justification.  Now we do not know all of the practices that Microsoft uses yet, but we know a number of them.  For example, their operating system, when they license it to original equipment manufacturers, the computer manufacturers, they require that the manufacturer not alter the first display on the screen from that provided by Microsoft, and of course that makes display of competing companies hard to use, if not impossible.  And they use restrictive agreements, with internet services providers and online services who are forced to deal with Microsoft because of its monopoly.  And it imposes conditions for example that they are forbidden to mention the availability of alternative or competitive software or browsers or whatever they are foreclosing.  We have a list of these practices.  For example, they have codes that they apparently include in their operating systems and other software -- programming -- so that it is difficult for consumers to load a competitor's browsers, including the Netscape browser.  And all these practices impose substantial costs upon rivals, much heavier costs upon the rivals than upon Microsoft.  And it is that kind of thing that we wish to challenge, and we wish the Department of Justice to investigate.  And that is in bare bones recitation of our case.

"I trust that the book is consistent with what I am saying today.  Even though twenty years has passed, I can continue to admire that book," said Bork in response to questions. "Having written the book, I refuse to take a case that would contradict my book, because that would be altogether too shabby.  And I won't.   And it was when I became convinced from examining what Netscape was saying, and examining what I had said twenty years ago in that book, and finding that the two were consistent, that I took the case."

He added that it would be "premature" to discuss remedies, such as injunctive relief.  He also stated that "Predatory practices are being used, and they should be stopped."

Bork distributed no brief or summary of his legal arguments at the meeting.  He stated after the meeting that he would probably be asked by Netscape to submit a brief to the DOJ encouraging an antitrust action.  However, he said that it is unlikely that either he or the DOJ would make the document public.  Hence, it may be hard for the public to learn how Judge Bork develops his "refusal to deal" theory.

Perhaps his argument, and that of the Justice Department, will evolve along the lines of the "essential facility" theory of the recent U.S. District Court opinion in Intergraph v. Intel.

Aside from his legal expertise, Netscape, Pro Comp, and the Department of Justice get two other enormously valuable things from Netscape's hiring of Bork.  First, they kept Microsoft from hiring him.  A lawyer can only work for one side in any case.  Given his longstanding scholarship in opposition to antitrust prosecution of tying practices, he would have been immensely valuable to Microsoft.  However, even if they do not use him, they have improved their position.  Second, he has the respect of the judges who will ultimately decide Microsoft's fate in the antitrust arena.

Bob Bork has a standing with the Supreme Court that no other attorney has.  Bob Bork has been held in low public regard since the vicious confirmation campaign trashed his reputation in 1987.  Yet, he is still held in the highest regard by most of the Judges of the Court of Appeals and the Justices of the Supreme Court, who know the content and quality of his legal scholarship and judicial writing.  Moreover, many Supreme Court Justices sit uncomfortably in their lifetime seats on the highest bench, when they ponder that but for coincidences of time and place, it could just as easily have been them who met Bob Bork's fate.