Microsoft vs. U.S. Dept. of Justice

By Bob Williams, President, Evergreen Freedom Foundation

Bigger is supposed to be better. Unless, of course, you take a successful software manufacturer smart enough to create a piece of software capable of taking computer novices and turning them into computer users.

In fact, the success of such a software manufacturer might just be enough to spark interest from the Department of Justice, an agency which appears to believe that bigger really isn’t better. And the Department of Justice is willing to change the legal definition of "monopoly" to hit home its anti-free market message.

But where, exactly, should we sort out this debate over which consumer preferences are acceptable and which are dangerous: the courtroom or the marketplace? Apparently, in the case of Microsoft, our federal Department of Justice believes the answer is the courtroom.

In September the U.S. Justice Department and 20 state attorneys general took Microsoft to court over alleged antitrust violations. The trial focuses mainly on whether Microsoft used its considerable clout over computer operating systems in order to obtain a larger market share for its products. They are charging that Microsoft broke antitrust laws against "tying" by its bundling of a successful Microsoft product (Windows 95) with one of their less competitive products (Internet Explorer).

The Justice Department case falls short in several areas, most notably in their misuse of antitrust laws. Antitrust laws are designed to protect consumers from monopoly providers when a monopoly reduces the quantity of goods in order to elevate prices. In this case, Microsoft has increased the quantity of their goods and prices have dropped. How does this combination break antitrust laws?

But is Microsoft a monopoly provider? The Justice Department and the attorneys general are attempting to manipulate incomplete economic theories by using this argument. Perfect competition is not possible between Microsoft and its competitors since each depends upon the other for survival. Nonetheless, if Microsoft’s commanding presence in operating systems automatically transferred to product monopoly, its "bundled" product, Internet Explorer, would have a much greater share of the market than it does today. Even when Microsoft offered customers a free shot at the Internet Explorer, most chose another product.

The fact is, consumers don’t have to buy Windows 95, and if they do buy Windows 95, they don’t have to use Internet Explorer for a browser. They can use Netscape Navigator or any of the other competitive browsers.

Even more important, complaints against Microsoft are not coming from consumers. They are being leveled by the Justice Department and Microsoft’s competitors. And no one is accusing Microsoft of price gouging or having a shoddy product. No evidence has surfaced showing how Microsoft’s consumers have been injured by the company’s decisions and actions. If computer vendors become dissatisfied with Microsoft, they can turn to other operating systems and chipmakers. If customers become dissatisfied they will not buy Microsoft products. So, tell me again, what is the Justice Department trying to protect consumers from?

During a recent debate on this issue, an attorney from Ralph Nader’s organization took a highly critical view of Microsoft’s market share. He undermined his own arguments, however, when stating proudly that his office used no Microsoft products. If this attorney was able to find competitive products to operate a successful practice without a single Microsoft product, doesn’t that clearly demonstrate that Microsoft is not a monopoly?

Far from being monopolistic, Microsoft’s behavior is competitive. Competitors are supposed to lower prices and provide innovative ways of easing consumers’ access to products.

The entire industry has benefitted from its rapid innovation and continual price decreases.

Since the complaints are not coming from the users of Microsoft products, but instead from the government and some of Microsoft’s competitors, we essentially have the federal government using our tax dollars to engage in a private business dispute.

The rapid increase of useful technology has created enormous challenges for our society. Many issues must be addressed. But the response from government should not be to crush all innovation by over-regulation and litigation.

If the federal government is going to look suspiciously at lower prices and improved quality as evidence of illegal activity, the U.S. and consumers are in deep trouble.

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org