The Historic Victory In United States v. Microsoft Corp
United States v. Microsoft Corp. is arguably one of the most well-known business law cases of its time. The case delved into the complex and contentious world of antitrust law, more specifically monopolistic practices in the burgeoning computer software industry. The background of the case began in 1998, when the U.S. Department of Justice (DOJ), along with 20 U.S. states and the District of Columbia, filed suit against Microsoft Corporation. They alleged that Microsoft had engaged in anti-competitive behavior by bundling its web browser, Internet Explorer, into its operating system, Windows, thereby stifling competition from other web browsers. The DOJ contended that this practice violated the Sherman Antitrust Act, and sought remedies that included breaking up the company. The case became the centerpiece of litigation relating to antitrust law for the next two years, and ended with a settlement agreement in late 2001. However, the importance of the United States v. Microsoft Corp. case reached far beyond the immediate outcome. The litigation helped define the limits of antitrust law in the tech industry , a field that was still in its infancy at the time. The outcome of the case helped cement the principal of using antitrust law to prevent monolithic companies from stifling competition. While the case confounded many at the time – Microsoft essentially admitted no wrongdoing and the breakup that was sought by the DOJ never happened – it opened a door to a new understanding of how antitrust law could be applied in modern business practices. The case set an important precedent for future antitrust actions involving technology companies, and laid the groundwork for how the government would approach potential monopolistic practices in the tech industry. It also forced Microsoft and other tech companies to reevaluate their business strategies in order to avoid drawing the attention of the DOJ. Interestingly, the settlement between the government and Microsoft did not completely satisfy all parties involved in the case. Congress sought to conduct further investigations into the company’s practices, but Microsoft resisted, setting off a lengthy series of debates involving Congress, the DOJ, and Microsoft. United States v. Microsoft Corp. remains one of the most influential business law cases of its era, and has continued to influence antitrust law for years to come.
The Outcome Of Airbnb, Inc. v. City of Santa Monica That Changed Everything
This case could be considered the epitome of local action meeting disruptive technology. In 2015, Airbnb, which connects travelers with individuals who would like to offer short-term lodging at their residences, was working in an environment of open skies. The online home-rental business was expanding nationwide, and doing a booming business. This business model had, effectively, turned the hospitality industry on its ear, allowing property owners to earn extra income, visitors to find lower-cost accommodations, and allowing cities and counties to augment tax revenues under transient occupancy ordinances.
However, with this public trust came responsibilities. In Santa Monica, which was struggling to control a seriously depleted and severely over-priced housing market, city planners had been exulting over the taxes Airbnb was generating to help support the local economy.
But "with great power comes great responsibility," and the City of Santa Monica – "the City," for short – was not as enamored of the business concept as the general population. The Santa Monica City Council quickly enacted a new ordinance that would limit overzealous users of the service to only one rental, prevent them from using certain of Airbnb’s services, and require that hosts register with the City as "Secondary Home Rental" owners, as well as pay a hefty registration fee. They were also required to maintain a minimum of three nights between bookings, and could not rent their primary residence for more than 180 days per year. The law further explained that failure to comply with these rules would be grounds for denial of renewal of their registration, and a fine.
Airbnb, as expected, was furious. They determined that the law was a veiled effort to regulate great harm to the business concept, and to destroy any advantage that the platform might enjoy over legal hotels and motels.
The City, on the other hand, claimed that the law was merely a limit on the number of times an individual could rent their residence – something they were entitled to do as municipalities, in part due the "California Coastal Act." The law, they said, was designed to combat the growing housing shortage in the City, especially given the influx of platform users. Airbnb’s disruption of traditional "finding a hotel" was simply too successful.
The District Court for the Central District of California decided the case on June 16, 2015, ruling that the Santa Monica law was valid under the California Coastal Act. They further ruled that the City was entitled to restrict property owners from profiting off of short-term stays by requiring them to register and pay a fee, since these were normal municipal powers.
The effect on the city was, in the long run, that they would be able to continue to take advantage of Airbnb enjoying the tax dollars that were generated by the company and its users. The City would be able to ascertain who, in fact, was using the service. And it would allow the City to "put the brakes on the party scene" that was transforming a quiet bayside community into a noisy event center.
Airbnb has remained undeterred. Their entrepreneurial efforts have continued to expand to new markets, new advertising strategies, and new innovations. They seemingly believe that people simply love the service too much to let the power of local governments prevent them from renting their homes.
Citizens United v. Federal Election Commission: Corporate Speech Rights
This landmark decision overturned previous legislation and court decisions which limited the influence of corporations in the political process. It opened the floodgates for money in politics by allowing corporations to fund independent campaign expenditure for federal races. The 2010 decision expressed that the First Amendment protected free speech regardless of the speaker’s corporate status, reversing the 1990 decision in Austin v. Michigan Chamber of Commerce, which upheld limitations on campaign spending by corporations. Although Citizens United is the biggest case affecting campaign finance, it is certainly not the only one. In an array of rulings, the Court has chipped away at campaign finance laws in order to protect freedom of speech, and in addition, protect corporations from regulation of funding independent political campaigns.
The Antitrust Drama: AT&T and Time Warner
In October 2016, AT&T Inc. announced that it intended to purchase Time Warner Inc. for $85.4 billion. Concerns were raised that the purchase would create a company with too much brawn, such that it would be almost impossible for smaller companies to compete. This prompted the Department of Justice (DOJ) to file suit in November 2017 to block the merger, and on June 12, 2018, a Federal Judge signed off on the merger, stating that the DOJ had failed to meet its burden of proof and proving the merger would raise prices for consumers.
This was the first vertical merger challenged by the government since the 1970s , according to The New York Times.
Traditionally, antitrust scrutiny has focused on horizontal integration (i.e., when two or more companies in the same industry could potentially reduce market competition). But as the Big Tech companies and other large business conglomerates continue to expand, vertical mergers will be up front and center of antitrust analysis. As such, the AT&T/Time Warner battle will sharply effect what we discuss and what we recommend to our clients in the worlds of entertainment and technology, setting a precedent for how to merge or acquire other companies going forward.
The Incredible Win In Tesla, Inc. v. Michigan Automobile Dealers Association
In what has become a legal battle felt across the nation, Tesla, Inc. long fought the Michigan Automobile Dealers Association (MADA) for the right to sell their electric cars straight from the manufacturer to the consumer, without using a third-party dealer as an intermediary. The auto dealer association argued that a state law requiring manufacturers to go through franchised dealers was meant to protect consumers from going out of business due to competition with car manufacturers—specifically, small car dealerships. However, the electric car manufacturer argued that the law benefitted big auto manufacturers more than it did consumers , protecting them from competition from companies like Tesla while hurting its consumers who wanted a new option in cars. In 2014, the Michigan legislature actually passed a law that seemed to directly address the controversy, allowing electric vehicle manufacturers to sell directly to consumers but disallowing other types of manufacturers from doing so.
Tesla immediately sued MADA, and after a long, high-profile battle, the Michigan Supreme Court ruled that the law violated the Constitution’s Equal Protection clause by treating different businesses with similar models differently. This monumental ruling opened the door for many other manufacturers to sell directly to consumers, and as a result, continues to influence a number of different industries.
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