The Microsoft Case: Not Solomonic but Stupid - antitrust case - Brief Article

MERE rumors of the Justice Department's proposed remedies for Microsoft's allegedly monopolistic behavior were enough to send the financial markets into a swoon, one that affected even some of the company's competitors who had been cheering on the government. Never ones to let evidence from working free markets unduly influence them, the antitrust enforcers have gone ahead with their plan to break up Microsoft. If they prevail, the company will be replaced by two offspring: one will sell the Windows operating system, the other will sell all the Microsoft applications and Internet products that run on the system.

The theory here is that there has been an "applications barrier" to competition: Not enough people have been buying operating systems other than Windows, because they want to use Microsoft's applications (such as Microsoft Word and Microsoft Excel). A half-Microsoft that made applications alone would have to supply them to the other operating systems, which could then take on Windows. And once Microsoft was split, each company could be left to make its way without further regulatory supervision.

The government's theory, however, misunderstands both the past and present state of Microsoft's competition. The reason the operating systems peddled by IBM and Apple did not succeed had much less to do with any "applications barrier" than with the fact that they were far more expensive than Windows. (Not that Apple's subsequent success means anything to the enforcers: They have arbitrarily excluded Apple from their definition of the relevant market.) There is plenty of software developed for other operating systems. Often, Microsoft's products either work on those systems or can be made to work without much expense. Services that once required software, meanwhile, can now be procured over the Internet.

Tinkering with markets it does not understand, ignoring the competition before its eyes in favor of an industry of its own imaginings, the Justice Department is poised to do real harm to the economy. This case should be abandoned before it wipes out still more billions of dollars of Americans' wealth.