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THE SMITH CENTER | for Private Enterprise Studies |
The good news from last week's appellate court decision in the Microsoft antitrust case was that Judge Thomas Penfield Jackson's silly decision to break up Microsoft was set aside. The bad news is that the appellate court did not toss out the entire lower court decision. Let us examine the issues.
For many people, the idea of attacking what may be the world's most successful corporation, and Bill Gates, the man that heads it, sounds like fun. But the federal government's and our own Bill Lockyer's -- pursuit of Microsoft is no laughing matter. So far, this witch hunt has cost the American taxpayer $35 million in litigation costs, and the meter is still running.
As an economics professor, I am appalled by this use of anti-trust law. This lawsuit does nothing to benefit consumers. It does, however, benefit the competitor companies, who spent millions of dollars lobbying the Department of Justice to file suit, the lawyers who have made a fortune on both sides of this issue, and the Attorneys General and bureaucrats, who are making political hay back home by demonizing Microsoft.
But the cost being born by businesses and consumers is too high.
While anti-trust law is designed to protect consumers, the breakup of Microsoft would be a disaster for consumers and businesses. The integration and standardization Windows brought us has been a boon for the public. What Bill Gates understood, much to his competitors' chagrin, was that most consumers people who use computers, not live computers want a system that works with and understands other systems, and that understands last year's programs and documents.
Over the past 10 years, Microsoft has lowered prices, produced a better quality product, and invested enormous amounts of money in research and development. That doesn't sound like monopolistic behavior by any standard.
Government intervention into the world of high tech programming and design sets a dangerous precedent, and it illustrates the fatal conceit of planners who claim to know more than they can possibly know about present and future market conditions, innovations, and opportunities. The breakup of Microsoft would cripple technological innovation and infringe on the rights of high tech companies to tailor their products to meet the needs of users.
If the government is allowed to dictate to Microsoft what technology it can develop to increase the effectiveness of an existing product or meet the needs of users, then we will have a crisis and ultimately a disaster in the technology industry.
So, although consumers and taxpayers didn't ask for this ill-conceived lawsuit, it's all of us who are paying the bill!
Since the case first came to the attention of Wall Street, Microsoft stock prices have plummeted to just over half of what they were in December of 1999 with devastating results for state and private pension funds, and small investors, all over the country. Nationwide, state pension funds have lost $144.2 billion. Here in California, since the March, 2000 breakdown of mediation on the case, Public Employee Retirement System funds have dropped more than $39 billion and the State Teacher Retirement fund has dropped by $15 billion. A new study by University of Texas economics professor Stan Liebowitz estimates that a breakup of Microsoft would eventually cost American consumers an additional $50 to 100 billion.
Judge Jackson's solution the break up of the company into an operating systems company and a software applications company is actually a punishment of those of us who purchase and use Microsoft products.
Such a break up. with the possibility even being raised of making the Windows code available to competitors, would have a tremendous impact on consumers: Increased costs and a return to the high tech chaos of 10 years ago; computers that came with no basic package of software; 2, 3, 4 or more different versions of the Windows operating system, each requiring different programs; and consumers having to purchase new software every time they buy a new computer.
All of this is brought to you by your government, and the high tech companies that couldn't beat Microsoft fairly in the competitive marketplace and so turned to the coercive power of government for succor.
Politics should rise above this strife of interests masquerading as a contest of principle.