Microsoft Mediation

The historic Microsoft monopoly trial took an odd twist on November 19th when federal Judge Thomas Penfield Jackson secured the agreement of the Justice Department and Microsoft to accept mediation by 7th Circuit chief Judge Richard Posner.

For most jurists, being a chief judge of a busy federal circuit court of appeals would be a full time job. But Judge Posner, often called a brilliant workaholic who grinds out a book a year on different subjects, thinks he can stimulate a settlement between the two warring factions.
The stock market believes in Judge Posner’s conservative reputation and his numerous writings scathingly critical of most past antitrust doctrines to jump Microsoft’s stock nearly 5 points in after-hour trading Friday (adding another $5 billion to Bill Gates’ fortune).

Are the boys on Wall Street being precipitous? After all, Posner’s colleagues and several law professors consider him unpredictable and his own man. They point out that as a mediator, he cannot force a settlement nor can he divulge any of the discussions to Judge Jackson or anyone else.

But then Judge Posner is not like any other prominent judge. He seems never to have had an opinion that he did not want to publish. His 30th book was a sharp denunciation of President Clinton’s lying in the Monica Lewinsky scandal and a general defense of Special Prosecutor Kenneth Starr’s handling of the case. No one would accuse him of having the conciliatory temperament that a mediator should possess.

One of his law students tells the story of Judge Posner, as a part-time professor at the University of Chicago Law School, coming into the first day of class and writing the word “Justice” on the blackboard. He then turned and said to his class that he did not want to hear that word in his course.

As one of the founders of the “law and economics” school of monetized thought, what Judge/Professor Posner meant was that quantitative economic reasoning could explain legal issues such as by a cost-benefit analysis. For example, in one of his books he argued for parents’
rights to sell their children for adoption to the highest bidder.

Throughout his career, Judge Posner, businessman Posner and law professor Posner have challenged many a conventional attitude, and antitrust law has been no exception. He has written that “The evils of natural monopoly are exaggerated, the effectiveness of regulation in controlling them is highly questionable, and regulation costs a great deal.”

It takes a deliberate price-fixing scheme between competitors or a tight cartel to get his antitrust dander up. Years before he became a judge, Posner started a consulting firm, called Lexecon, that advised corporations how to defeat antitrust law enforcement and undermine regulatory actions.

Given his voluminous antagonism to government regulation, it is not likely that Judge Posner will nudge his sparring parties toward “conduct” changes by Microsoft that need regulatory oversight. But then, would he encourage “structural” changes such as Microsoft’s breakup into two or more companies that separate its operating systems business from its applications business?

Certainly Judge Jackson’s findings of fact would support a breakup remedy. But it is difficult to envision Judge Posner recommending such a move. He would probably prefer some self-executing remedies upon Microsoft that would presumably unleash competitors against the giant software company’s anti-competitive monopolies.

In his book on Antitrust Law (1976) Posner doubted whether any company could have enough persistent market power over time to actually impose predatory pricing.

Since Judge Posner, as mediator, has no decisional power and cannot publicize his views, what is Judge Jackson’s exercise here all about? There is about a 90 day window for the mediation to conclude before Judge Jackson issues his long-awaited findings of law.

It appears that Judge Posner’s function is to move the government and Microsoft to a settlement by the force of his intellect and his probabilistic assessment of either parties’ chances on appeal. All in private, subject to his influence.

How much better it would be to continue the open judicial process, now that the trial phase is over, to an open judicial conclusion under the public’s watchful eye. A full record and precedent would contribute to the development of antitrust law in these new fields of monopolistic technology networks.

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