Trustbusting

Editorial in Investor’s Business Daily
October 21, 1998

The Hollow Case Against Microsoft

Washington’s arrogant trustbusters have finally put Microsoft on trial. With Bill Gates and the software giant firmly in the government cross hairs, are the feds going for the kill?

Maybe. A government attorney told the court Monday that Microsoft Corp.’s ‘’monopoly power . . . must be dissipated.’’

That sounds like the trustbusters are seeking the death penalty - a court-ordered breakup of Gates’ empire.

The government hopes to prove that Microsoft has used unfair business practices to expand its market dominance.

Microsoft’s alleged sins?

It tied its Web browser to its popular Windows computer operating system, which is found on nine of 10 computers. And it forced personal computer makers to choose between buying browser-equipped Windows or nothing at all, says the government.

The alleged victim is Netscape Communications. Microsoft’s tactics have squeezed it so hard that the free world is no longer safe, declaims the government.

Netscape, which makes a competing browser, doesn’t appear to have been mortally wounded, though. On Monday, it released a new version of its browser. Analysts apparently believe it will give Netscape an edge in the browser wars.

The government’s complaint that Microsoft ‘’bundles’’ its Internet browser with Windows also lacks substance. A ‘95 consent decree prohibited Microsoft from bundling software products with Windows. But an appeals court ruled in May that Microsoft could tie its browser to Windows 98, the latest version of its operating system.

A month later, the court ruled that the consent decree didn’t even apply to Windows 95, the previous operating system.

Having suffered a setback with the first ruling, the trustbusters changed strategy. Before the second ruling, the Justice Department and 20 state attorneys general filed an antitrust suit against Microsoft. The suit was based on many of the same allegations it used to obtain the consent decree.

But even in an antitrust suit, the previous court rulings would have made it difficult for the trustbusters to make their case had they stuck to the ‘’browser war.’’

So the government widened the case to include claims that Microsoft used its market dominance to bully other companies that were moving into emerging markets as potential rivals.

Malarkey. Microsoft hasn’t violated anyone’s rights. It didn’t steal from anyone. There was no coercion.

All Microsoft did was build a product that it felt consumers would buy, and enter into exclusionary and voluntary contracts with other companies. It has no power beyond the value of the products it makes.

This case is like every other antitrust case: Washington bureaucrats flexing their political muscle. The government is hounding a company that makes a product that has revolutionized the world. It’s the industry standard. It’s cheap.

And let’s not forget that Microsoft provides 27,000 jobs. It’s also made a lot of money for its investors.

None of that matters to Gates’ bitterest enemies. Some of his more hostile foes will be happy only if Microsoft is forced to release its source code, the proprietary formula that makes Windows what it is. It’s a remedy that’s been whispered, and it would, in effect, nationalize Microsoft. That’s a nice way to say the government would steal intellectual property.

If the Justice Department were truly interested in curbing Gates’ dominance, it doesn’t need to steal from Microsoft, break it up or even fine it. It could just wait. By the time any court-ordered breakup could take effect -10 years is the average estimate - the fast-paced technology market will have bypassed Microsoft. Market dominance doesn’t last forever.

Microsoft knows this and has taken a hard line against the trustbusters’ crusade. Its attorneys are confident. We wish it well.

The government needs to have its nose bloodied in a high-profile case like this. Then maybe it will be less zealous in the future in using antitrust laws to assault freedom under the guise of the public good.