Business

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

The Justice Department argues in a federal antitrust suit that Google is a dominant tech company that has abused its market power to bully industry partners, protect its monopoly and thwart competition.

That has a familiar ring. As U.S. et al. v. Google goes to trial this week, the echoes of the landmark federal suit against Microsoft, a quarter-century ago, are unmistakable. In the Google case, as with Microsoft then, a tech giant is accused of using its overwhelming market power to unfairly cut competitors off from potential customers.

But on the eve of the Google trial, it seems unimaginable that the case could command the widespread attention that the Microsoft proceedings did. Microsoft in the late 1990s was a singular tech titan and its leader, Bill Gates, was a national icon.

The Microsoft trial, which began in October 1998, spanned 76 days of testimony over more than eight months. Every major news organization covered it. The New York Times reported on the proceedings daily.

It was a trial that often dealt with cerebral concepts like “network effects” and “switching costs.” Yet The Times gave it the kind of day-to-day coverage ordinarily reserved for very few courtroom dramas over the years, like the O.J. Simpson trial and the Lindbergh kidnapping trial.

Many days, there were spin sessions on the courthouse steps. Microsoft representatives would say the government had presented isolated snippets of text, taken out of context, certainly not proof of anti-competitive conduct. Lawyers for the Justice Department and states who joined the lawsuit would mostly say the damning testimony spoke for itself.

Microsoft was found by a federal judge to have repeatedly violated the nation’s antitrust laws. An appeals court upheld most of that decision but was skeptical of the government’s preferred remedy — breaking up the company.

In its lawsuit against Google, the Justice Department points to the Microsoft case and that company’s tactics in the 1990s. “Google deploys the same playbook,” the government declares, by illegally wielding its might in online search much as Microsoft did with its personal computer operating system, Windows.

But Kent Walker, Google’s president of global affairs, said there were big differences between the Microsoft of the dot-com boom and today’s Google. Back then, Mr. Walker was deputy general counsel of Netscape, the commercial pioneer of internet browsing software, which was the main target of Microsoft’s campaign to hobble competition.

About 90 percent of personal computers used Microsoft’s Windows software, the main gateway to the young internet, and Microsoft controlled the software and services that were featured on those Windows PC screens.

Google, on the other hand, has to work with and pay partners that make smartphones, browsers and other devices, Mr. Walker said. Its deals with companies like Apple and Samsung to make Google the default search engine on their smartphones are legal and benefit consumers, giving them the best technology and reducing costs for device makers and their customers, he said.

“We think there are aspects of the Microsoft case that are actually very helpful to us here,” Mr. Walker said in an interview.

When the Microsoft trial started, it was the high tide of early internet euphoria. E-commerce was just getting underway, and every industry wanted to jump on the digital bandwagon. This was before mobile computing. The first Blackberry, essentially an email device, was introduced in 1999. The iPhone, which started the smartphone era, didn’t arrive until 2007. If you wanted to get online, chances are you did it through a computer that ran Windows.

Microsoft was rich, powerful and ambitious. It had started to move beyond software. In 1996, it entered the media business in a partnership with NBC, setting up the cable channel, MSNBC, and a website, msnbc.com (Microsoft shed its stakes in both, years later).

Executives in industry after industry worried about what Microsoft might do next, sharing a sentiment expressed by Rupert Murdoch, chairman of News Corp: “Everybody in the communications business is paranoid of Microsoft, including me.”

Today, Google does not loom as large as Microsoft once did. It is one member of the Big Tech club. It is an undisputed giant in search and online advertising, and its software and artificial intelligence prowess can extend to other industries. But its Big Tech peers — Amazon, Apple, Meta (Facebook) and even Microsoft — are all under scrutiny in the United States and abroad.

The Microsoft case also had a huge personal dimension because of the stature of Mr. Gates. He was the world’s richest person, and during the course of the trial, as the stock market surged, Mr. Gates’s stake in Microsoft soared to $100 billion. In 1995, a researcher at the Massachusetts Institute of Technology built a website, called the Bill Gates Personal Wealth Clock, to track Mr. Gates’s net worth.

Mr. Gates was widely admired as a brilliant entrepreneur, polls showed. He was Microsoft’s leader, deeply involved in company operations and especially its internet strategy. He viewed the government’s antitrust pursuit as an assault on his life’s work, colleagues said.

Mr. Gates was not a witness at the trial, but excerpts from his videotaped deposition testimony were shown. He was quibbling, unresponsive and forgetful. At one point, he seemed not to understand the term “market share.” (The joke immediately afterward was that “share” was the concept he didn’t grasp.)

Later, Microsoft officials said Mr. Gates had merely been following legal advice he was given to narrow questions and avoid broad or responsive answers. If so, it was bad advice. His deposition testimony undermined his credibility — and Microsoft’s — with the judge.

Google’s founders, Sergey Brin and Larry Page, have a far less prominent role in the current case. They are no longer deeply involved in the company. Sundar Pichai, the chief executive of Google’s parent company, Alphabet, is a thoughtful, soft-spoken company man who joined Google in 2004 and rose through the ranks.

Although the legal theory advanced by the Justice Department mirrors the one used in the Microsoft case, the outcome of the trial will hinge on the evidence presented to Judge Amit P. Mehta of the U.S. District Court for the District of Columbia.

The government has already suggested its evidence will lack the vivid language of the Microsoft case. There is no equivalent of “cut off Netscape’s air supply” or piles of email filled with no-holds-barred terminology.

In the Google suit, the government cited the search company’s instructions to its employees to avoid words like “kill,” “crush” and “block” in their emails.

“Google did learn one thing from Microsoft — to choose its words carefully to avoid antitrust scrutiny,” the Justice Department wrote.

For its part, the government has understandably borrowed heavily from the Microsoft case in its lawsuit against Google because those legal theories “worked so well against Microsoft,” said William Kovacic, a law professor at George Washington University and former chairman of the Federal Trade Commission.

After the George W. Bush administration came to power, the Justice Department and Microsoft reached a settlement. The resulting consent decree prohibited Microsoft from imposing restrictive contracts, freed PC makers to load and feature other companies’ software and forced Microsoft to disclose more technical information.

Many people criticized the consent decree as toothless. David Yoffie, a professor at the Harvard Business School, was initially a critic, but his views had changed.

Today, Mr. Yoffie teaches a course on antitrust and technology, and it begins with the Microsoft consent decree. “There were a litany of actions that were no longer possible because of the consent decree,” he said. “It did limit Microsoft’s ability to go after newcomers, not ones trying to compete with Microsoft head-on but at an angle.”

The leading beneficiary of the more open environment, Mr. Yoffie said, was an internet search start-up, with new technology and later a new business model. It was called Google. It was founded in September 1998, one month before the Microsoft trial began.

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