MS on Trial Judge Richard Posner, the mediator appointed by Judge Jackson, has become a very important figure in the Microsoft case, but unfortunately we shall hear very little indeed about what is discussed in his mediation meetings, since they will be private. Most likely they be held in Chicago, since he is Chief Judge of the 7th circuit Court of Appeals.
Posner's background provides some interesting insight into his views, and gives us some idea of what thinking he will bring to bear. He is a leading antitrust scholar and has probably been mischaracterised as being right wing, perhaps because he was appointed, like Judge Jackson, by Ronald Reagan.
Posner's right-wing reputation may in part result from the view he once expressed that children needing a family might better be bought and sold in a free market, rather than being assigned by a government-regulated adoption procedure. He is a significant intellectual supporter of the Chicago School, which would naturally make him philosophically nearer to Microsoft's view than to that of the DoJ, although he has not demonstrated a hidebound defence of Chicago School thinking.
His major work is generally considered to be his 1990 The Problems of Jurisprudence, and an analysis of it suggests he is anything but of the right. In his introduction he wrote: "Judges do not want to be the handmaidens of the powerful. But if independence means that only judges decide cases as they like... it is not obvious that an independent judiciary is in the public interest; the people may be exchanging one set of tyrants for another."
He noted that "obedience to rules is just one virtue among many, and it cannot be given its proper weight without considering the content of the rules and other pertinent social and moral values". His grasp of economics has also mistakenly suggested that he is a conservative, but his views about jurisprudence put him firmly to the left.
He also wrote: "Who has licensed judges to decide cases in accordance with social vision?" The answer is of course nobody, and that it is constitutional law that should provide the basis for any decision -- and the law does not favour Microsoft.
Posner appears to favour judge-made law rather than congress-made law, but with reservations. He has argued that cases involving economic issues should be considered from a strictly pragmatic viewpoint, with the objective of maximising societal wealth. He appears to prefer an "efficient" market, which in effect means an unregulated market, and likes pragmatic jurisprudence rather the constitutional originalism favoured by Robert Bork, a Chicago School colleague whom Microsoft tried to recruit to help its defence, but decided to help Netscape instead.
The Cato Institute appears to take the Chicago school stance for the main part, and has reprinted Posner's book Natural Monopoly and its Regulation from 30 years ago, when Posner decided that the existence of a natural monopoly does not provide adequate justification for governmental regulation.
In it he wrote: "The resources and energies of government should be directed to problems we know are substantial, and that we think are traceable to government action, and cannot be left to the private sector to work out. There are plenty of those problems and it is doubtful that natural monopolies is among them."
Posner defined the concept of a natural monopoly after a consideration of regulated monopolies such as water, power, telecoms and cable. He saw a natural monopoly as a circumstance where it is economically more efficient for a single organisation to have a monopoly, in order to avoid duplication and wasted investment.
However, the view fails because of the evidence that Microsoft has arguably suppressed innovation as a result of the monopoly that it enjoys, and the anti-competitive practices that have discouraged significant competitors. With IBM failing with OS/2, who could succeed? It seems unlikely to most observers of the present situation that the market can readily self-correct for the Microsoft effect, as Posner would probably postulate.
The arguments for a natural monopoly are that the overhead is reduced, and zero competition allows less money to be spent on sales and marketing, and more on the product. But economies of scale have become of secondary importance compared with market share, which is a consequence of the law of diminishing returns (more customers result in better value for the customers).
However, the evidence is that consumers are not getting a better deal, that Microsoft is increasing its prices for Windows (unlike nearly all other hardware and software products) so making historically unprecedented profits.
Posner writes on wide range of topics. He has been extraordinarily productive as a writer, with several law review articles each year, and an eclectic range of books on subjects ranging from jurisprudence to Clinton's impeachment process, in which he developed a harsh criticism of Clinton's "violations of federal criminal law", and mused that perhaps Clinton will pardon himself before leaving office.
In 1981, he wrote The Economics of Justice in which he pontificated about privacy, but failed to mention conflicting arguments. In 1992 he wrote Sex and reason. In his book Antitrust: an Economic Perspective, he was against splitting up of companies.
Mediation by such a senior judge is unprecedented, and his acceptance shows the importance with which the case is regarded. He has a great deal of flexibility as to how he knocks heads together. It may reasonably be expected that he would be trying to achieve an outcome that did not split Microsoft into Baby Bills, that restores competition to the market and has an element of punishment.
We can only guess at the result, but persuading Microsoft to give a great deal of ground and the DoJ to accept the terms of a consent decree, is an extremely difficult task. Although Judge Jackson still controls the tempo in his court, if Microsoft appeals before or immediately after Judge Jackson issues his findings of law, or before an Order as to remedies, or even appeals against Judge Jackson's use of Lawrence Lessig, it is just possible that an appeals procedure could stymy any conclusion before the US presidential election in November.
Certainly the DoJ will go into negotiations with its eyes wide open this time, but Microsoft is an ace negotiator that will no doubt find its match in Judge Posner. At this stage, the more likely outcome is no deal. It may well turn out that Lessig presents his recommendations before Judge Posner reports whether he has succeeded, which Microsoft would probably prefer in that it gives it better insight into the possible alternatives. It is a most interesting situation, so stay tuned. ®