"Jackson is creating a new antitrust law as he makes this ruling."
A matter of restraint for Microsoft
By Charles Babcock, Inter@ctive Week
June 13, 2000 6:04 AM PT
The Department of Justice's antitrust case against Microsoft represents a junction of the free enterprise and fair play crosscurrents that underlie American business culture. We want the rules to ensure that everyone has an equal chance; we also want to reward the enterprising with success.
The outcome of the Microsoft case illustrates, if nothing else, that these can be contradictory desires.
Microsoft became a monopoly power, not because of its ruthless ability to drive competitors out of business, but because it was at the forefront of understanding the true meaning of the revolution in cheap personal computer hardware and software.
The company understood that if it could get into core markets and set de facto standards, a huge body of software developers would follow its lead and create value by generating products around those standards. In its early days, Microsoft did this competitively and fairly, supplying the technology that developers needed.
The clearest challenge to its monopoly power was the appearance of Java. Another company -- namely Sun Microsystems -- was commanding the attention and loyalty of developers, and hence presenting a direct challenge to the underpinnings of not the existing Windows monopoly, but Microsoft's ability to sustain that monopoly and extend it.
This is why Microsoft's overreaching moves to produce a Windows-specific version of Java becomes so damning. It was within Microsoft's power to produce Java tools that ran superlatively on Windows, but were still compatible with everyone else's systems. Instead, the software giant chose to produce tools that ran superlatively on Windows -- and only on Windows.
Until Microsoft crossed this Rubicon, it can mainly be illustrated that software prices fell in market after market that Microsoft entered and that this clearly benefited consumers. That's one reason why consumers show so little appetite for the breakup of Microsoft.
Falling prices are contrary to classic economic theory and critiques of monopolies.
Because Microsoft was able to seize a technology dislocation -- the PC revolution -- and drive that trend, the company became a new style of monopoly -- one that enlarges its position by driving down prices and undercutting opportunity in the next phase of expansion.
This is a starkly real hazard to would-be competitors. But it is an ill-defined one.
In the government's antitrust case against the Redmond, Wash., company, it seemed to me that neither U.S. District Court Judge Thomas Penfield Jackson nor the DOJ prosecutors convincingly addressed the issue of consumer harm, other than to speculate on how Netscape Communications might have survived if only Microsoft had not engaged in its monopoly tactics.
This is not proof by the previous standard of reduced competition and rising prices.
Jackson is creating a new antitrust law as he makes this ruling.
Let's hope, as we review the written descision, that it leans toward addressing the hazard of too much economic power restraining trade, and not toward a set of rules geared to restrain the next technology revolution.
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