Commentary

Justice Attacks Microsoft with Antitrust Vaporware

The news media fussed over the Department of Justice’s “million dollars a day” claim against Microsoft, but the stock market reacted realistically. Microsoft’s stock barely budged. Traders rightly saw Justice’s case as the lawyers’ equivalent of vaporware: a lot of hype that would have few real results.

Despite its headline-grabbing power, the “million dollars a day” fine remains purely hypothetical. The Department of Justice could have asked the court for almost any sanction, from a billion dollars a day to a requirement that Bill Gates wear funny hats. What they will actually get remains to be seen.

Furthermore, despite Attorney General Janet Reno’s soundbites about “monopoly,” the Department of Justice has not formally alleged that Microsoft is breaking any antitrust law. Instead, Justice claims that Microsoft is violating its 1995 settlement of an earlier, untried antitrust suit.

In 1995, Microsoft bought its peace from the Department of Justice by agreeing not to condition the licensing of its Windows operating system on the licensing of other products. Now Justice charges that Microsoft requires manufacturers to license Internet Explorer, Microsoft’s browser application, if they want to license Windows 95. Microsoft replies that it offers Internet Explorer as an integrated part of the Windows 95 operating system and notes that the 1995 settlement only says that consumers shall not be be “force fed” software because of Microsoft’s supposed monopoly power. Justice need not worry. In the fast-paced market of consumer software, products must succeed or fail on their own merits.

While Internet Explorer has won attention because consumers have started using it, other Microsoft Internet products have not done nearly as well. Along with the new Windows 95, Microsoft introduced the Microsoft Network. The software for accessing MSN came free with every new computer’s Windows 95 operating system. America On-Line, primary competitor of the budding MSN, warned Justice that Microsoft would soon overwhelm all the other online service providers.

Today, AOL has acquired Compuserve and holds the overwhelming share of the market. The MSN has suffered because AOL offered the features that consumers wanted and has worked hard to keep improving them.

The lesson: Microsoft products get used only to the extent that consumers find them useful. That’s why few people bothered with Windows 1.0 and 2.0, whereas Windows 3.0 became hugely popular. Existing market share provides no guarantee of future success in the fast-breaking computer industry.

At root, the Department of Justice’s attack on Microsoft aims to prevent the computer software industry from responding to consumer demand. The Department of Justice, not Microsoft, should be held responsible for interfering with consumer choice and free markets.

Dave Kopel is an associate policy analyst at the Cato Institute and research director of the Independence Institute.