Showdown in the Microsoft Case

Email Print
FacebookTwitterShare

Remember
the Microsoft case? You know, the one where Judge Thomas Penfield
Jackson ruled to breakup the premier software firm on the planet?
Well the appellate process starts Monday, February 26, and the odds
are reasonable that the bulk of Jackson's irrational decision will
be vacated.

Here's
why. Jackson swallowed uncritically the government's argument that
Microsoft's tying of its browser and operating system harmed competition
and violated antitrust law. Unfortunately, Jackson's opinion flew
directly in the face of the same D.C. Circuit Court currently hearing
the appeal that unambiguously ruled, in 1998, that Microsoft's technological
integration provided "plausible benefit" to consumers
and was perfectly legal. Tying the browser and software may well
harm certain competitors but it doesn't harm competition or consumers.
Convincing the Circuit Court that they were 180 degrees mistaken
on this issue will be an impossible sell, even for the slickest
government attorney.

But
it gets worse. Many of Judge Jackson's so-called "findings
of fact" and economic inferences appear on examination, to
have no basis in reality. Take the "fact" endorsed by
Judge Jackson that Microsoft's share of the market in operating
systems was 95% and rising, clearly establishing that they were
a "monopoly." Wrong. The lower court relied upon a definition
of the "relevant market" that was incorrect since it excluded
arbitrarily all of the computers and networking software made by
Apple, Sun, Novell, and a host of other companies. In addition,
counting only licensed software systems allowed Judge Jackson to
exclude incorrectly all operating systems sold at retail, those
downloaded directly from the Web, and all "naked" computers
shipped without any operating system at all. These factual errors
narrowed severely the relevant market and turned Microsoft into
a "monopolist." The Circuit Court will likely conclude
that Microsoft's actual market share is less than 70% and falling,
and that there is no "monopoly" and no monopolization.

Jackson
also seriously erred in his finding that the many thousands of applications
written for Windows created an insurmountable "applications
barrier " to entry. Again, the facts and inferences are very
suspect. The simple observable "fact" that there ARE viable
competitive systems like Apple and Linux refutes Jackson's "insurmountable"
inference on its face. These systems compete with Microsoft's even
though the number of applications is far fewer. This fact has allowed
economist Richard McKenzie to conclude that it may take several
hundred applications, surely not many thousands, in order to be
a viable competitor with the Microsoft system. But, again, if potential
rivals can leap over these so-called "insurmountable"
barriers, then there is no Microsoft monopoly and Jackson is in
error.

The
D.C. Circuit must also reverse if only because of Judge Jackson's
extraordinary behavior in the "remedies" phase of the
case. Jackson's quick and total acceptance of the Department of
Justice's break-up plan and other remedial remedies is probably
without modern precedent. Equally insulting and without precedent,
was his concluding sneer that Microsoft was not entitled to any
due process in fashioning a remedy since "…the case is over.
They lost." Incredible. Where's the ACLU when you need them?

I
have always argued that antitrust law violates conventional notions
of efficiency and justice and should be repealed by Congress. If
this case doesn't make my point nothing will. The best that the
D.C. Circuit can do at the moment is repeal Jackson's irrational
ruling and restore some semblance of justice and economic sanity
in the software industry.

February
23, 2000

Dom
Armentano is professor emeritus in economics at the University of
Hartford and author of Antitrust:
The Case for Repeal
(Mises Institute, 1999). He lives in Vero
Beach, Florida.

Email Print
FacebookTwitterShare