Antitrust Expert Donald Boudreaux on the Microsoft Case:
Interviewed by IBD
From Investor's Daily:
Media coverage has focused on courtroom tactics.But the case ultimately focuses on interpretations of law and questions of economics.
For instance, does Microsoft have a monopoly on operatin system? If so , is that necessarily a violation of federal antitrust laws ? What impact will this trial have on the computer and internt industries ? And how will it affect the way we do business in America ?
IBD spok to Donald J. Boudreaux, president of the Foundation for Economic Education, a think tank in Irvington - on - Hudson, N.Y. Boudreaux brings a unique perspective to this topic.He's an expert in both the law and the economics of antitrust.
IBD: How will this case impact the business environment in the US ?
Boudreaux: Let's assume the judge dismisses this case right now. That won't happen , but let's assume that. Just by having gone this far, this case has helped reinvigorate an already resurgent antitrust enforcement.
Firms that does'nt like how vigorously others are competing are more likely to ask for an antitrust suit to be filed than they were before all this began. We've estabilished a precedent . The government has shown it will give a favorable ear to firms that wish to compete in the courtroom rather than the market.
IBD: What's this trial all about ?
Boudreaux: The core issue is the bundling of the internet Expolorer Web browser with the Windows operating system. The allegation being that somehow, by bundling the two together , it gives Explorer an unfair advantage.
IBD: Does it ?
Boudreaux: Bundling is illegal if a certain set of conditions hold. The company doing the bundling must have monopoly power in one good , such as Microsoft arguably has in operating systems with Windows. And the bundling must affect a substantial share of the market.
Clearly, tying Explorer to Windows has helped Microsoft gain a huge share of the browser market. But when Microsoft started to include Explorer with Windows, Nescape had the lion's share of the Web browsing market. So Microsoft actually brought more choice to that market .
IBD: So does Microsoft have a monopoly ?
Boudreaux: A monopolist isn't just someone with 80% or 90% or 100% market share. You can have a large market by providing consumers with very good value.And we've seen firms with large market shares lose their dominance by growing complacent and letting other firms offer better value to customers.
A monopolist is someone who is secure in his market position.And Microsoft clearly does'nt see itself as secure . Bill Gates knows that if his company slacks off, then some new technology could sweep away its market share.
IBD: Are there other conditions that must be met for bundling to be illegal?
Boudreaux: If it's a single good, there can be no tying. You can't argue that General Motors is guilty of an antitrust violation because it sells windshields on new cars. You can technically separate a windshield from a car and sell each apart from the other. But most people consider a windshield to be a part of a car.
The government has presented witnesses who argue it's technically possible to separate Windows and Explorer . Microsoft says it isn't very easy, maybe even impossible to do that.
But that isn't the real issue. The relevant question is : Do consumers prefer the two to be combined? Microsoft says they do. And last summer, an appellate court ruled that Windows and Explorer are essentially one product. You'd think that would have settled the matter, but it is obviously hasn't.
IBD: If Microsoft can prevail on the bundling issue, will it win the case?
Boudreaux: The case has now gone beyond the question of bundling Explorer with Windows. Microsoft is now being accused of leveraging its alleged monopoly in operating systems, of being too aggressive, of making life unfair for its rivals.
But aggressiveness and greed aren't necessarily illegal. The question is whether consumers have been hurt by Microsoft.
One very interesting part of the trial was when Franklin Fisher , an economics professor at the Massachusetts Institute of Technology and the chief economic expert for the government , was asked what Microsoft has done that has hurt consumers.
His answer was something like, "Nothing yet, but we have to worry about what they might do in the future if they extend their dominance into the Internet. That dominance could stifle innovation, and they could be in a position to keep out rivals."
There's a new study that's just been released by the competitive Enterprise Institute. Economist Stan Liebowitz shows that only after Microsoft became dominant in operating systems, the price of applications software started to fall. It said Microsoft was the driving force behind falling price.
Toy Soldier, What is your opinions ? WHAT IS THE HARM TO CONSUMERS?
Microsoft dominate the OS by lowering the price, as a result more consumers can afford the computers which expand the market for application softwares, as a result , the drop of price due to an economical scale of the market. So what is the harm to the consumers ? The government only wants to hurt the consumers and benefit the weak
competitors. So, if you want to win in the market in the future, well, just go to the court, the government will help you !!!!! |
