Microsoft Essay, Research Paper

- Legal_Issues – Microsoft and mediation negotiations -

Microsoft and mediation negotiations

By: Steve

Since its antitrust trial began in 1998, the software giant

Microsoft and the government have met in negotiations three

times; now, a fourth round of mediation has been scheduled,

these to be presided over by Richard Posner, the chief judge

for the 7th U.S. Circut Court of Appeals in Chicago. Although

the two sides differ in opinion on many key issues, both sides

have maintained that they are open to settlement. The

appointment of Posner has aroused some controversy however,

because some, including William Kovacic of George Washington

University, say that his views on antitrust cases are not in

line with the governments; that is, they do not favor the

breaking up of large firms found to be monopolies. Microsoft

was determined to be a monopoly in a fact finding by Judge

Thomas Penfield Jackson performed three weeks ago. The

movement towards mediation and away from traditional

adjudication is an example of alternative dispute resolution

(ADR), which is becoming increasingly common in modern

society. While alternative dispute resolution programs were

previously found mainly in local, informal settings,

Mediation programs are more and more attached to existing

court systems or social service agencies rather than community

or neighborhood groups. (Merry, 1984) Because the mediator in

the Microsoft case was appointed by the trial judge to oversee

settlement talks, the mediation was explicitly linked to the

existing court system. Mediation is being used as a tool by

the trail judge to avoid a long and costly trial. Galanter, as

cited by Merry, says that while the procedures used by the

court and mediations may differ greatly, the authority claimed

and the form of social control exercised do not. That is, when

Microsoft and the government enter into settlement talks, led

by Posner, his authority in the mediation will not

significantly differ from his authority assumed while

presiding over his courtroom as a judge. He will retain

approximately the same power over the litigants. Galanter goes

on to say that the formal legal system is expanding its use of

ADR, including judicial mediation. As can be seen in this

case, the two forums of dispute settlement, formal and

informal, are not completely separated. The formal court

system has incorporated the informal method of mediation with

a slight twist; the mediator is a member of the formal legal

system. The fact that Posner is a judge and a member of the

formal legal system is of great importance. The principle

contribution of the courts to dispute resolution is providing

a background of norms and procedures against which

negotiations and regulation in both private and governmental

settings take place. (Galanter, 1984) Because Posner is a

part of the court system, he is in an ideal position to

establish such norms and procedures; he works with them every

day and is familiar with their operations and applications.

His knowledge of the court system will also be integral in the

negotiations as applicable to what Galanter refers to as

bargaining endowments, or what each side can use to his

advantage in negotiations. Posner will be able to identify the

bargaining endowments of each side, because he knows what the

probable outcome of formal adjudication would be, and let both

Microsoft and the government use these during the

negotiations. For example, if Posner knows that formal

adjudication will probably result in the prohibition of

Microsoft to distribute their browser for free in the future

and that they will also be broken up into two or more smaller

firms, this would be a bargaining endowment for the

government. They would use the probable outcome of a court

trial to their advantage in informal negotiations. In this

example the government could offer Microsoft the chance to

remain as one complete unit instead of splitting into two or

more smaller ones, in exchange for ceasing to give away their

browser. By employing such bargaining endowments, mediations

are said to be taking place in the shadow of the law. This

means that each side bears in mind what could happen in court

throughout the negotiations. Posner s appointment as mediator

will amplify this effect because his presence as a US district

court judge reminds both sides of the possible outcomes if the

case were unable to reach an agreement in mediation and had to

return to court. Another important factor in the Microsoft

antitrust case is the frequency with which Microsoft and the

government interact with one another. Because Microsoft is a

forerunner in a pioneer industry, the government constantly

keeps watch over its operations, trying to ensure that its

business practices are both fair and legal. This necessitates

taking the firm to court when the government questions the

legality of the operations or actions of Microsoft. This

frequent meeting in court fulfills the first of three

requirements for a party to be known as a repeat player, that

the unit has had and anticipates repeated litigation. The next

two requirements are also met by both Microsoft and the

government; both have relatively low stakes in the outcome of

any one case. For the government, the loss of this case will

not result in any significant revenue declines. If Microsoft

loses, they could be forced to sell their browser instead of

giving it away, which could only increase revenues. The firm

could also be broken up into several firms, but the owners of

Microsoft would retain ownership of the new companies. The

third requirement, that a party has the resources to pursue

its long term interests, is also met by both the government

and Microsoft, who employ full time lawyers as part of their

regular staff. (Galanter, 1975) The status of both of the

litigants as repeat players has a large impact on the

preferred means of dispute settlement in this particular case.

Because the two parties have similar resources and goals and

will face future litigation, informal resolution, such as

mediation offers both a less hostile environment and one more

conducive to compromise. The development of informal

relations between regulatory agencies and the regulated firms

is well known. (Galanter, 1975), and accordingly, Microsoft

and the government have developed a set of relations that are

mutually beneficial. To fight out their differences in court

would leave both bitter and any dealings with each other in

the future hostile. Because the conflict is one of interest

and not of dissensus, there is more incentive to settle. Both

the government and Microsoft will benefit from the continued

operation of the firm; thus, they have the same goal, but

disagree on how best to achieve it. Such a conflict of

interest lends itself to the compromise model , in which the

establishment of guilt is not at issue and also where the two

parties involved in a dispute look forward to a relationship

with each other in the future. The compromise model stresses

compromise and agreement which is best achieved not through

the formal court system, but through informal means of dispute

resolution such as mediation.