[A neoliberal take on the Microsoft antitrust case apparently, John.]
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TRIAL & ERROR
by Paul Beckner and Erick R. Gustafson
http://www.cse.org/informed/1588.html
Citizens for a Sound Economy Foundation
February 5, 2001
CSE Foundation Releases Trial and Error, a
New Book Chronicling the Microsoft
Antitrust Case
by Paul Beckner and Erick R. Gustafson
Microsoft, after all, is the largest and most profitable
company in the leading sector of the American economy.
Its products are used by hundreds of millions of people
around the world. And its largest stockholder, Bill Gates,
has become a symbol of the fabulous wealth generated by
the revolution in information technology.
What's more, the case has touched issues that are
fundamental to the way so-called New Economy firms
operate.
Microsoft became an antitrust target only because its
Windows software dominated a traditionally defined
market - in this instance, the market for operating
systems for Intel-compatible PCs. Yet the underlying
economics of information technology virtually guarantee
"winner-take-most" outcomes in which almost all
consumers decide to use a particular product. If Microsoft
can be singled out this way, so can many other
successful firms.
Competition in old "bricks-and-mortar" industries largely
plays out through small changes in prices and quality. In
the New Economy, by contrast, competition is largely felt
through innovation. The constraints on Microsoft's market
behavior do not come from the fear that a competitor will
sell a similar product for a bit less money, but from the
threat of major technological and organizational changes
that make its software much less valuable to consumers.
Thus the government's focus on standard measures of
competition is misplaced, and the consequences could
extend far beyond Microsoft.
Microsoft was accused of "tying" its Internet browser to
Windows with the goal of dominating the market. But
there are powerful economic and technological incentives
for integrating functions into single software packages.
Indeed, if integration is an offense, every major software
maker is a scofflaw. And since the consequence of
integrating what was previously a stand-alone feature is
often the ruin of a competitor, every major software
maker shares Microsoft 's vulnerability to similar charges.
As do many other high-technology companies.
Much of the evidence against Microsoft consists of
e-mails and other documents depicting markets as
Darwinian jungles in which only the strong survive. But
such bluster is the norm in the New Economy, where most
of the executives are young and companies rise and fall
at the whim of technology and investment bankers. If
intent rather than outcome becomes the standard by
which New Economy firms are judged, all of Silicon Valley
is in trouble.
At the same time, the Microsoft case symbolizes the
government's renewed vigor in trustbusting. The Microsoft
trial was replete with new theories for the New Economy
that attempted to justify old theories of regulation.
What's more, the antitrust revival has unleashed a new
generation of lawyers on American business. In addition to
Microsoft, the federal government has taken to the courts
against credit card companies, airlines - even the makers
of "intense breath mints." And in cases such as Microsoft,
an army of state attorneys general has joined the federal
government.
But despite the obvious significance of this case, it has
been treated remarkably casually by the judicial system.
The Justice Department took up the cause after heavy
lobbying from Microsoft's bitterest competitors. Once the
fight had been joined, though, the department seemed
determined to find fault with the company even after its
initial claims of anticompetitive behavior were undermined
by the decisions of an appellate court. Later, it would
propose a remedy seemingly unrelated to the case it
presented and to the judge's findings. Meanwhile, the trial
judge made numerous questionable decisions, ranging from
admitting hearsay evidence to denying Microsoft the
opportunity to present evidence on the consequences of
a breakup, that called the court's credibility into question.
Equally disappointing, the mass media generally seemed
inclined to limit their analysis of the trial to questions of
who was winning and who was losing. Disappointing, but
perhaps not surprising: the range and novelty of the
issues-legal, economic, and technological-make this case
unusually difficult to understand. Moreover, most of the
experts reporters could call on for advice had direct
interests in the outcome of the case.
This book represents an effort to cast light on the
implications of U.S. v. Microsoft with a mix of analytic
essays, Op/Eds and editorials-some widely distributed
before, some not. It is not "objective," if objectivity
means presenting every viewpoint with equal weight.
Indeed, it is safe to say, all of the writers share a
skepticism about the merits of the case against Microsoft.
But most also share the sense that it's long past time to
turn down the rhetorical heat: as long as this case
remains a touchstone for visceral feelings about big
corporations and big government, the only possible
winners are Microsoft's bitterest commercial rivals.
-Paul Beckner and Erick R.Gustafson
Trial and Error
Citizens for a Sound Economy Foundation
(PDF format, 200 p. 1.52 Mb)
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