An Agency Problem Analysis Of United States Vs. Microsoft

The Justice Department's antitrust case against Microsoft Corporation has generated considerable interest and passionate opinions, but in general is not well understood. This paper explains the legal basis and proceedings of the case in language accessible to the business community. At this writing, the appeals court has affirmed the trial court's conclusion that Microsoft violated the law in several respects, but has reversed the breakup remedy prescribed by the trial judge. Accordingly, this article examines, as a practical matter divorced from legal technicalities, whether there should be any further action taken at all, and if so, what the remedy should be. Interpreting the illegal conduct as symptoms of an agency problem leads to the conclusion that individual- based, rather than corporate- based, remedies would be more reasonable.