MS trial: Perusing the 'Posner effect'

Microsoft jumped at the opportunity to make Judge Richard Posner a mediator. But the DOJ didn't. Ralph Nader, for one, thinks he knows why

Attempting to foretell a judge's intentions is about as iffy as reading tea leaves.

But trial watchers are already trying to dissect the impact that 7th Circuit Chief Judge Richard Posner will have as mediator in the Department of Justice vs. Microsoft antitrust case. Not only are they wondering whether Posner will be able to bring Microsoft and the DOJ to the bargaining table -- and under what terms -- but whether he'll be able to help insure the DOJ and the state attorneys general present a unified bargaining front.

Judge Thomas Penfield Jackson appointed Posner as mediator on November 19, a day after a private conference in his chambers involving Microsoft, DOJ and representatives of the attorneys general. According to transcripts of that meeting that were released earlier this week, Microsoft immediately applauded Jackson's "surprise" proposal, while DOJ representatives wanted a day to think about Jackson's proposal before accepting.

Should the DOJ's hesitation be interpreted as fear of the impact of a conservative intermediary with strong antiregulatory leanings?

Consumer advocate and Microsoft critic Ralph Nader, for one, is suggesting that Microsoft may benefit from Posner's hands-off reputation. In an online article distributed on Tuesday, Nader notes that "Judge Posner's conservative reputation and his numerous writings scathingly critical of most past antitrust doctrines" caused Microsoft's stock to jump nearly five points in after-hours trading Friday, "adding another $5bn (£3bn) to Bill Gates' fortune."

Posner, a founding member of the Chicago School of Law and Economics and a recognised antitrust expert, was appointed to the US Court of Appeals for the 7th Circuit in Chicago in 1981. He served in the position until 1993, when he was accepted his current position as Chief Judge.

Nader says that Posner has questioned whether any company could enjoy sufficient, persistent market power to engage in predatory pricing. (Interestingly, The Cato Institute -- a think tank that has penned treatises favouring Microsoft during the DOJ antitrust trial -- sells one of Posner's books, "Natural Monopoly And Its Regulation," published in 1998.)

Says Nader: Posner "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."

Nader adds that, prior to embarking on his legal career, Posner started a consulting firm, called Lexecon, "that advised corporations how to defeat antitrust law enforcement and undermine regulatory actions."

Nader's concerns, however, may have more to do with the mediation process itself than the choice of mediators. "Judge Posner's function is to move the government and Microsoft to a settlement. ... All in private, subject to his influence. How much better it would be to continue the open judicial process ... to an open judicial conclusion under the public's watchful eye," he said.

Other trial watchers aren't quite so quick to place Posner firmly in the pro-Microsoft camp. They note that while Jackson is a conservative Reagan appointee, he issued strong findings of fact that found Microsoft to have abused its monopoly power.

Some say they fear that Posner's hands-off approach means that Microsoft is more likely to escape the settlement process unscathed, conceding few, if any, structural alterations and equally few conduct changes. Others note, however, that Posner is not afraid to advocate for antitrust enforcement when warranted.

"It's very Chicago school to say if there's a monopoly, just bust them up," says Eugene Crew, a senior partner with the San Francisco-based intellectual property and antitrust firm Townsend, Townsend & Crew. "I think he would recommend a structural change over constant and regular government intervention" when helping to find common settlement grounds.

But Crew adds that Posner's real contribution towards settlement will likely be in the risk-assessment space, more than in the "head-banging, let's make a deal space."

Given his prestige and position as a federal circuit judge, Posner's assessment of Microsoft's odds on appeal will carry a lot of weight. If Posner feels such an appeal is likely to fail, Microsoft may feel even greater pressure to settle, particularly in light of Posner's views on antitrust law.

"A mediator is not an arbitrator. He's a facilitator of communication. His job is to get both sides to narrow the perception gap and lower their guard and their posturing," Crew says.

According to mediation protocol, Posner is not allowed to share the content of any discussions with anyone, including Jackson. In addition, the results of his work are not binding. Once the mediation process is deemed complete, approximately 90 days are slated to elapse before Jackson issues his Proposed Rules of Law in the case.

Additional reporting by David Raikow

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