Microsoft currently licenses its Windows 95 operating system to PC makers on condition that they also take (at no charge) its Internet browser Explorer. If the operating system and browser are in fact separate products, then this arrangement is a tying agreement forbidden by a 1995 consent decree between Microsoft and the Department of Justice.
Microsoft claims, however, that its browser function has now been fully integrated into Windows 95 and that the consent decree allows it to sell “integrated” products. Unless the parties settle, a federal judge will have to decide whose interpretation of the consent decree is correct.
Legal semantics aside, a larger public policy question looms: Why should antitrust regulators have the power to decide whether computer products can be sold tied or integrated?
Since tying and integration are functionally equivalent anyway, and since an important part of the computer marketplace has already decided that integrated products make economic sense, what public purpose does antitrust oversight serve?
Section 1 of the Sherman Act (1890) and Section 3 of the Clayton Act (1914) currently prohibit tying agreements that may “restrain trade substantially.” In addition, there is a vast body of antitrust case law that prohibits firms with dominant market shares in one product (the tying good) from requiring buyers to take a second product (the tied good) as a condition of sale or lease.
Such regulation has never made much economic sense, however, and having the government micro‐manage business agreements hardly promotes the public interest.