Mandatory Contracting Remedies in the American and European Microsoft Cases

Abstract:     
Antitrust law has long recognized that firms have a qualified right to refuse to deal. Nevertheless, a refusal to deal or an exclusionary contract may reduce competition by denying a dominant firm's rivals needed resources or outlets. As a remedy in such cases, a court may require the defendant to form contracts (or at least offer to form contracts) on specified terms. The American and European Microsoft cases both resulted in mandatory contracting remedies aimed at fostering competition. Various provisions in the orders require Microsoft (1) to permit its trading partners to deal on favorable terms with Microsoft's rivals; (2) to permit computer manufacturers to sell machines with versions of the Windows operating system from which certain functionality has been deleted; and (3) to disclose and license to rivals certain types of interoperability information. Parts of these orders are still being implemented, but it is now possible to evaluate the outcomes of most of them. While the orders in the first category have benefited consumers to some degree, the orders in the second category have accomplished nothing. The interoperability provisions have thus far accomplished little at great expense; the European order on this subject may actually facilitate cloning of Microsoft's proprietary server functionality. These experiences should provide guideposts for courts in crafting future mandatory dealing orders.

Keywords: antitrust, remedies, refusal to deal, mandatory contracting

JEL Classifications: L40, L41, K21, K40

Working Paper Series