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To: Bearded One who wrote (23762)	1/5/2000 11:21:00 PM
From: Gerald R. Lampton	Read Replies (2) \| Respond to of 24154

Another free market economist, George Priest, neatly dispatches the network effects argument advanced by many of the conservative backsliders. In a nutshell, advocates of network effects claim that consumers are locked in to a dominant technology (e.g., Windows) because of the need for compatibility. Priest, writing in the current Texas Review of Law & Politics, reminds us that the central goal of antitrust law is to benefit consumers. Ask yourself, he advises, whether consumers would be better off or worse off if their network were dismantled. Whenever a network bars entry, it's because the efficiencies are so great that the network cannot be duplicated. So the barrier and the efficiency are two sides of the same coin. To illustrate, suppose prices decline by $1 because of network efficiencies but increase $2 because the dominant provider exploits its competitive edge. No consumer would join that network, but the extraordinary profits would attract competitors. Conversely, assume that network efficiencies drive prices down by $2, but the dominant provider drives them up by $1. Competitors would find it unprofitable to enter, but consumers would surely benefit. In other words, states Priest, if the network helps consumers, the objective of the antitrust laws is satisfied. If the network harms consumers, the harm is self-correcting. cato.org

To: Bearded One who wrote (23762)	1/5/2000 11:24:00 PM
From: Gerald R. Lampton	Respond to of 24154

The Seattle Times Copyright (c) 2000 Bell & Howell Information and Learning Company. All rights reserved. Wednesday, January 5, 2000 Microsoft trial James V. Grimaldi Seattle Times Washington bureau WASHINGTON - After a weeklong holiday break, the government and Microsoft are appearing this week before a mediator behind closed doors in Chicago. Microsoft lawyers are in Chicago today to meet with Judge Richard Posner, chief of the 7th U.S. Circuit Court of Appeals, who was recruited to mediate a settlement. Lawyers for the U.S. Department of Justice and 19 states met with him yesterday, said people familiar with the discussions. While no settlement in the storied antitrust legal battle appeared imminent, Posner has called for meetings again next week. The parties expect to have a sense this month whether a settlement is possible or whether it is time to end talks for now. U.S. District Judge Thomas Penfield Jackson ruled Nov. 5 that Microsoft had used a monopoly in Windows software to harm consumers, competitors and innovation. He then urged negotiations before he issues his final judgment. To jump-start talks, Jackson recruited Posner, who is renowned for his intellect and whose prolific writings have advocated minimal government intervention for antitrust matters. In light of his views, Posner was expected to give Microsoft some hope for what the software giant would consider to be a suitable resolution. Since an initial session Nov. 30, Posner has met with Microsoft and prosecutors separately four times, including today and yesterday. Both sides are due in court Feb. 22 for final arguments on how Jackson's findings of facts apply to antitrust law. Given those findings, Microsoft is likely to be found to have violated the law.