Microsoft highlights flaws in antitrust laws
Judge Thomas Penfield Jackson's decision in the Microsoft case well illustrates why antitrust laws are too slow and blunt an instrument to shape competitive marketplaces in a fast-moving, high-tech world.
Jackson's first mistake is in his constricted definition of the market to be examined in determining whether Microsoft has monopoly power. Jackson limited the relevant market to operating systems for Intel-compatible personal computers.
In the real world, the competition is in getting computer devices to do what consumers want done: word processing, storage and retrieval of information, sending and receiving information. In all of these consumer functions, Microsoft has always faced competition, never more so than today.
Jackson acknowledges, without realizing it, that the real competition is in functionality in his analysis of why Netscape posed a threat to Microsoft's monopoly. Netscape, of course, is not in the business of manufacturing operating systems for Intel-compatible personal computers. It makes a Web browser.
Jackson asserts that Net-scape's Web browser permitted users to access applications other than Microsoft's and hence offered a threat to Microsoft's operating system monopoly.
Exactly. But if functionality provides the competition, how are applications accessed through a Web browser competition to Microsoft, but Apple personal computers and hand-held computer devises not?
According to Jackson, Microsoft saw Netscape as a threat to its operating system monopoly, and hence sought to snuff it out. How? Well, by developing and seeking market dominance for its own Web browser, the Internet Explorer.
Now wait a second. If the Netscape Web browser offered competition to Microsoft's operating system by accessing remote applications, how in the world does Microsoft protect its operating system monopoly by promoting its own browser that can do the same thing?
Even Jackson could not maintain the fiction that the relevant market is Intel-compatible personal computers through the entire course of his 41-page opinion. One of Microsoft's sins he cites is offering Apple inducements to install Explorer rather than Net-scape on its computers. But if the Mac operating system isn't a competitor to Microsoft, a contention on which the entire decision rests, what possible relevance does what browser it contains have to an antitrust analysis?
Jackson also contends that Microsoft violated the law by using one monopoly, its operating system, to try to achieve another, in Web browsers. Here, at least, the logic holds up, even if the judgment does not.
Microsoft allegedly sought to achieve a browser monopoly by bundling its own Web browser with its operating system, brow-beating computer manufacturers to install its browser exclusively, and making other browsers and applications difficult to work on its operating system.
Now, a 1998 appellate court decision expressly gave Microsoft the right to bundle, a decision Jackson, weirdly, seeks to overturn from a lower level, which is why he wants direct review of his decision by the Supreme Court, rather than it being routed through the same appellate court.
Microsoft clearly engaged in brutish competitive behavior. But the antitrust laws are not a Miss Manners code of business etiquette. Microsoft's brutish conduct violated the antitrust laws only if it had a monopoly and sought to acquire another.
Although it has gained significant market share, Microsoft hasn't achieved a monopoly in Web browsers. And by the judge's own logic, success in the second market, Web browsers, offers competition in the first market, operating systems.
Now the trial enters into the remedy stage, in which the judge will decide whether to restructure Microsoft or restrict what it can produce or how it can market.
Meanwhile, alternatives to both personal computers and Microsoft's operating system and applications are busily being invented and marketed. The natural market forces driving this enhanced competition to better serve consumers is hurt rather than helped by the Microsoft antitrust case.
The proof? The day Judge Jackson announced his decision, the Nasdag lost $450 billion in value, of which Microsoft constituted only $80 billion.
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