Microsoft: Predatory Innovator in the Competitive High-Tech Sector?

Today, Citizens for a Sound Economy Chairman C. Boyden Gray commented on the recent “Findings of Fact” in U.S. vs. Microsoft Corporation.

Judge Penfield Jackson’s recent “Findings of Fact” in the Microsoft trial paints an interesting picture of the technology sector. Amidst ample evidence of a competitive and dynamic industry, Judge Jackson reverts to a static and narrow definition of Microsoft’s market to assert that the computer software giant is, indeed, a monopolist with predatory intentions. “The findings in the Microsoft trial raise important questions that must be addressed by the court,” said C. Boyden Gray, Chairman of Citizens for a Sound Economy. “It’s clear that the high-tech world is characterized by fast-paced, aggressive competition. What’s not so clear in the findings is any evidence of actual consumer harm. To the contrary, the findings paint a picture of an essentially satisfied consumer enjoying this country’s greatest economic boom.”

In the court’s findings, the world is forever stuck in the rut of an unchanging Intel-based PC paradigm, which Microsoft has frozen for the foreseeable future. However, from the consumer’s perspective, and from the perspective of producers vying for business, the market extends well beyond a specific computer configuration. “Future value in the computer market will come from new applications and new uses for computer technology,” said Gray. “From broad-band boxes that provide an array of services, to new appliances with integrated computer technology, consumers are demanding new products and services unrelated to Intel-based PCs. And the broader market is thriving. Like any other competitor, Microsoft is in no better position to predict future consumer demand.”

The findings suggest Microsoft is a predator harming consumers. Yet CSE’s Gray comments, “The findings of fact provide little direct evidence of consumer harm. There is a great deal of discussion about possible future consumer harm from potentially higher prices than exist today. But the court’s complaint with current prices is that they are too low. As the findings specifically state, ‘Microsoft could be stimulating the growth of the market for Intel-compatible PC operating systems by keeping the price of Windows low today.’ Is this harm to consumers?”

Similarly, the complaint about innovation is not that there is too little, but rather that there is too much. Thus, the court finds that “While Microsoft may not be able to stave off all paradigm shifts through innovation, it can thwart some and delay others by improving its own products for the greater satisfaction of consumers.”

How achieving the “greater satisfaction of consumers” constitutes a violation of law is not fully explained. This case, Gray noted, appears to be the first known application of the doctrine of “predatory consumer-satisfying innovation,” a message Silicon Valley should not be welcoming.

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