No rational person would be upset if an auto dealer preset the radio stations on a new car. That’s because the customer can change the presets in a few seconds. Microsoft’s opening screen works the same way. To suggest that Windows users — the folks that the antitrust laws are intended to protect — are somehow restricted in their choice of Internet sites is patently absurd.
Finally, DOJ has accused Microsoft of entering into a series of “exclusionary” contracts with the intent of burying Netscape. To be sure, lots of companies negotiate exclusive deals all the time, but those deals can run afoul of the antitrust laws if one of the companies is a monopolist. The question, then, is whether Microsoft has tried to leverage its monopoly in operating systems to obstruct other companies from doing business with Netscape.
For example, DOJ gripes that Microsoft offered a place on its Windows desktop to both Intuit and AOL only if those companies would pare their dealings with Netscape. And DOJ protests further that Microsoft’s contracts with Internet service providers and content providers required that they diminish or sever their relationship with Netscape. True or not — and Microsoft vigorously disputes the allegations — those contracts are utterly irrelevant to this case. Whatever monopoly Microsoft may enjoy in the operating systems market, it plainly did not exploit that monopoly in negotiating the so‐called exclusionary contracts. In a nutshell, DOJ has identified the wrong market. Here’s how the government missed the boat.
Remember, Microsoft did not tell Intuit, AOL, ISPs and ICPs that they could not buy the Windows system. Instead, Microsoft is charged with refusing to provide referrals and space on the Windows desktop, which is used by those companies to advertise and distribute their products. So the pertinent market in which to look for monopoly power is not the operating systems market but the advertising or software distribution market.
Microsoft does not have a monopoly in either of those markets. Vendors sell software through retail stores, over the Internet, by mail order, bundled with hardware and through a variety of other channels. Products are advertised in newspapers and magazines, on radio and television, by direct mail, over the Internet and on and on. Not even the Windows desktop is controlled by Microsoft, which uses only 7 of 49 possible icons. In other words, 85% of the desktop space is available to PC manufacturers and consumers, who can display icons for any programs they wish, including software produced by Netscape and other Microsoft rivals. In order to show that Microsoft used monopoly power to “coerce” customers into signing exclusionary contracts, the government first must examine the relevant market. It hasn’t done so.
The overriding lesson here is that consumers want an integrated operating system, which is easier to operate, document and debug; less expensive to market and distribute; improves quality control; and provides a uniform standard for software developers. That’s the verdict of the marketplace; it ought to be the verdict of the court. Judge Thomas Penfield Jackson should take his cue from South Carolina’s attorney general, Charles Condon, who withdrew from the Microsoft suit after AOL announced its acquisition of Netscape: “Recent events have proven that … innovation is thriving,” noted Condon. “Further government intervention … is unnecessary and … unwise. Consumers have not taken a leading role in this action. That’s because there are no monopolies on the Internet.”
If Judge Jackson can appreciate those dynamics, if he can overcome his apparent distaste for Microsoft’s aggressive behavior, then he may well bring this ridiculous case to a sane conclusion — promoting competition instead of subsidizing competitors. Yes, it could be the age of wisdom, or it could be the age of foolishness.