Against Microsoft : A primer for conservatives

National Review, Feb 7, 2000 by Robert H. Bork

The Microsoft case will soon move on to the remedy phase. That will present more complex problems than the conclusion that Microsoft violated the Sherman Act. The Depart ment of Justice will have to decide whether to seek a remedy addressing only Microsoft's behavior, or urge structural relief. Either way, there are complicated issues to be ad dressed-but conservatives should not reflexively oppose consideration of the dissolution of Microsoft. There are advantages to a structural remedy that should not be overlooked by free-market advocates. A structural remedy would avoid detailed regulation by court decree. Regulation of this industry is probably the worst of all possible courses; certainly no one should want to repeat the court supervision of the telephone industry following the AT&T breakup. Not only might the effects be deadening, but a detailed decree would be vulnerable to Microsoft's demonstrated capacity to maneuver around prohibitions. The AT&T experience does, however, provide one hopeful aspect of a dissolution of Microsoft: The parts of the company after dissolution might have far greater value to shareholders than the intact company does.

What we need now is less slogan-mongering and more thoughtful analysis of a complex topic. A position that boils down to "Private sector good, government bad" is less a philosophy than a tantrum. Aaron Director, the founder of the law-and-economics movement at the University of Chicago, was fond of saying that laissez faire never meant more than that proposals for government intervention should be examined under a presumption of error. Indeed, that is all a sensible, rather than a knee-jerk, conservatism can mean. The facts of the Microsoft case are easily sufficient to overcome that presumption.

RICHARD A. EPSTEIN

JUDGE Bork's pointed defense of Netscape again confuses the welfare of Netscape with the welfare of consumers. His limp conclusion is that anti- trust injury to consumers should be presumed from Microsoft's aggressive entry into the browser market, just as it is in horizontal price-fixing cases. But why? Rigged prices exclude some consumers altogether from the market, and raise the costs to others. Huff and puff as he will, Bork cannot deny that over the short run, Microsoft's entry lowered, not raised, consumer prices, and undercut the Netscape monopoly in the browser market.

So what long-term consequences should lead us to reject these gifts? Bork claims that the case involves a potent mix of predation and tie-ins that insidiously undercuts innovation by imposing barriers to applications. He writes as though giving away the browser for free condemns Netscape to perpetual losses. Wrong. As to predation, the entire prospect is far- fetched when the marginal cost of additional copies of Netscape or Explorer is virtually zero. How is it possible then to distribute additional copies at below cost? Indeed, Netscape now offers its browser for free-because, like Microsoft, it hopes to earn revenue from third- party advertisers and vendors. Bork never explains why the absence of an operating system prevents Netscape from carrying out the competitive counterstrategy it has in fact employed. Clearly, there's no predation here; if Bork were right, Netscape would have just abandoned the market entirely.