Cato Policy Analysis No. 352 September 30, 1999

Policy Analysis

Microsoft Redux: Anatomy of a Baseless Lawsuit

by Robert A. Levy

Robert A. Levy is senior fellow in constitutional studies at the Cato Institute.


Executive Summary

Welcome to the postmodern world of high-tech antitrust where big is once again bad, lofty profit margins are a wakeup call to government regulators, executives are brought to heel for aggressively worded e-mails, pricing too high is monopolistic, pricing too low is predatory, propping up politically wired competitors is the surreptitious aim, bundling products that consumers want is illegal, and successful companies are rewarded by dismemberment. That's the Orwellian world in which Microsoft finds itself, a year into probably the most important and manifestly the least justified antitrust crusade of our generation.

Antitrust law aside, the principle of the matter is simple: Microsoft created its operating system and has a right to sell the system as it sees fit. But antitrust law pays little attention to such niceties as property rights. Instead, the reigning shibboleths are economic efficiency and consumer welfare. The antitrust questions, therefore, are whether Microsoft has a monopoly, whether it's misusing its market power, and whether government can find a cure that isn't worse than the disease. The answers are no, no, and no.

Microsoft is behaving not like a monopolist but like a company whose very survival is at stake. Its prices are down and its technology is struggling to keep pace with an explosion of software innovation. Facing competition from new operating systems, consumer electronics, and Web-based servers, Microsoft now operates in a world where anyone running a browser will soon have the same capabilities as today's Windows user.

Meanwhile, antitrust officials are preoccupied with antiquated notions—tying arrangements, exclusionary contracts, predatory pricing, and a host of other purported infractions—all wholly irrelevant, unless the real purpose, of course, is to pacify rent-seeking executives trying to attain in the political arena what they have been unable to attain in the market. It's time for our government to acknowledge that bankrupt antitrust doctrine is destructive of a modern Internet economy.

Full Text of Policy Analysis No. 352 (PDF, 22 pgs, 124 Kb)

© 1999 The Cato Institute
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