|GETTING TOUGH WITH MICROSOFT
Is the Justice Department stifling or protecting innovation?
May 26, 1998
in this forum:
Should the Justice Department consider "vaporware" an unfair practice? Why hasn't a similar suit come about earlier? What occupies the 10 percent of the market Microsoft doesn't control? What innovations is Microsoft responsible for? Is there less public resentment towards Microsoft than other monopolies? The Online NewsHour asks: We've received many letters from viewers who support Microsoft's innovations and disapprove of government innovation in Microsoft's business practices. Is there less public resentment and anger towards Microsoft and Bill Gates than other monopolies in U.S. history such as Standard Oil, IBM and AT&T?
Paul Gillin responds:
I wasn't around when Standard Oil was being prosecuted, but my understanding is that that company used tactics that were very similar to Microsoft's, e.g., it kept prices low and built up tremendous market share, which it used to keep competitors out of the market. As Mr. Chernow said on The NewsHour, smart monopolies don't gouge consumers for the last cent. In fact, consumers often don't know how life would be in a deregulated environment, so they have no basis for comparison.
Microsoft is a popular company. It delivers good products at reasonable prices. With the price of PCs dropping continuously, people have been getting more and more for less and less. What's the matter with that? So yes, there is less public resentment toward Microsoft because consumers believe they are getting a good deal.
However, a Justice Department cannot work by public opinion poll. It must operate in the public interest as a protector of a competitive market. A company that achieves a dominant market share is always in a good position to keep out competition and thus hinder innovation. I think Justice is looking at the Internet appropriately, meaning as a major platform for communications and commerce in the future. If one company is able to dominate the browser early on, it could be in a position to significantly limit competition in that future market. I emphasize "could", since this is certainly not an open and shut case. But I do think Justice is correct in dealing with the potential harm to consumers from lack of competition and doing it now before it becomes a problem.