Understanding the Microsoft Antitrust Case

Citizens for a Sound Economy (CSE) has taken a steadfast position throughout the successive stages of the trial opposing the government’s antitrust lawsuit against Microsoft. At its heart, the government’s case against Microsoft is predicated on the notion that the government can predict what the technology sector will look like in the future. By claiming that Microsoft’s Windows operating system may not contain an Internet browser, the government limits the ability of a software maker to determine how software products will best utilize the latest technology to meet consumers’ needs. In a world according to the lawsuit filed by the Department of Justice (DOJ) and North Carolina’s Attorney General Michael Easley, innovation would be limited and consumers should be content with the same products and same features.

On economic grounds, the government – through the DOJ – should not determine how products are made available in the software marketplace or what they look like. Consumers should decide for themselves whether a particular product is useful and worth the price being asked for it.

On legal grounds, the government must prove that consumers have suffered harm in order to meet the requirements of antitrust law. CSE believes that this burden of proof has not been met and that no harm to consumers has been demonstrated. The presiding judge has, however, claimed that Microsoft somehow hurt consumers by adding features to Windows without increasing its price. While the judge did not find direct evidence of consumer harm, he believes that Microsoft is a predatory monopolist. By doing so, the judge has ignored a separate court ruling that found the practice in question – the integration of Windows and the Internet browser – to be beneficial to consumers.

CSE’s core messages in this case are:

Microsoft has not harmed consumers.

Consumers have benefited from the new choices and low prices provided by the technology sector and innovative companies like Microsoft.

When the government controls technology, consumers face higher costs, fewer choices, and less innovation.

North Carolina Attorney General Michael Easley’s message to entrepreneurs is “[D]on’t innovate and don’t succeed or you’ll be next.”

Through the Microsoft lawsuit, the government is traveling down the road toward greater control of the technology sector. The various proposals to remedy Microsoft’s “crime” all share a common trait – government regulators would determine what software products should look like.

The government’s case is more about corporate welfare than protecting consumers. This lawsuit is, in part, the result of Microsoft’s competitors who traveled to Washington to lobby the government to get what they were unable to get in the marketplace – protection from tough competition from a successful rival.

Equally as bad as the government’s lawsuit is the new generation of baseless class-action lawsuits brought by trial lawyers who hope to cash-in on Microsoft’s industry-leading innovation in the name of consumers. We need to save our legal system from this elite group of greedy trial lawyers who are using these government-induced lawsuits (now filed in more than five states) to enrich themselves, limit innovation and raise costs for consumers.

Every day new firms enter the marketplace to compete for consumers’ attention. The technology marketplace is among the most dynamic and vibrant in the world – a fact that the pending merger between America Online and Time Warner demonstrates. Today’s computers have far more capabilities than a similarly priced computer purchased only last year. Many of today’s products and applications were virtually unknown a year ago.

Government regulation and the wheels of bureaucracy cannot keep pace with the rate of change in the technology sector. By providing a variety of choices to consumers, competition in the technology sector weeds out poor products and unnecessarily high prices. Through this lawsuit, the government wants to assert control over the marketplace and the effect will invariably be to limit choices and to punish innovation. Federal regulators cannot second-guess or forecast a market as dynamic as the software industry. Requiring Microsoft, or any other software company, to check with government bureaucrats before it can release a new product or breaking the company up into pieces will only slow innovation and harm consumers.

Ultimately, the message sent to innovators and entrepreneurs by this lawsuit is that prosecution is the reward for providing a new product at a lower price than your competitors. CSE believes this is a policy for failure and consumer frustration.