I appreciate your points about lock-ins and the like. But I think that the weakness of the case against Microsoft becomes clearer when we look more carefully at the precise practices that are claimed to constitute monopolization.
There are two initial points that must be made about the analysis of these practices under the antitrust laws. As I am certain you know–though some of our readers may not–any rule adopted with respect to Microsoft must be a rule of general application: that is, a rule equally appropriate as applied to any U.S. firm. Our system of laws is one that at least aspires to guarantee equality to all citizens, including business firms. Our country does not accept one rule for the rich, another for the poor; or one for the successful, another for those who wish they were.
The second point is that in examining any particular practice, we can assume that the practice benefits Microsoft–Microsoft would not have adopted it otherwise. The question is whether it benefits Microsoft because it promotes Microsoft’s products, thus enhancing competition, or whether it provides no particular benefit to the promotion of a Microsoft product to consumers, but chiefly harms Microsoft’s competitors. Only a practice that has this last effect is illegal under the antitrust laws.
What are some of the licensing practices that contributed to Judge Jackson’s conclusion of monopolization?
One licensing/pricing practice is that Microsoft charges OEMs a higher license fee for Windows unless the manufacturers “drastically limit the number of PCs that they sell without an operating system pre-installed” (paragraph 58). Now, by one view, this practice may appear harmful. It seems to reduce the opportunities for installation of alternative operating systems. But even Judge Jackson explains the practice as an effort by Microsoft to constrain piracy of its product. If Windows is already installed, what is the incentive to illegally copy it? Judge Jackson puts a different twist on it: He invokes the practice to prove the invincibility of Microsoft’s monopoly. According to the judge, this practice proves that Microsoft’s “pricing is not substantially constrained by the need to reduce the incentives for consumers to acquire their copies of Windows illegally.”
What a strange emphasis. It is a fundamental proposition of any society that recognizes a right to property to allow the owner of the property to prevent it from being stolen. Since Judge Jackson fully recognizes that there are many advantages to the world of consumers to all be using Windows, he must recognize that, of any of the currently available operating systems, Windows is the most likely to be stolen. Microsoft’s licensing practice, therefore, is merely a means of retaining its property right in Windows where other means of property rights enforcement are imperfect. Would it be sensible to adopt a rule here that constrains an owner’s right to protect its property? I don’t think so.
Take a second and more central licensing practice. Judge Jackson heavily emphasizes what have been referred to as the tying practices involving Internet Explorer. A “tying arrangement” is the sale of one product on the condition that the buyer must also purchase another product. Practices of this nature had formerly been prohibited per se under the antitrust laws until roughly two decades of research were unable to show clearly any evidence of consumer harm from the practice. Today, a tying arrangement is judged under what is called the Rule of Reason: an ancient legal doctrine that means, in essence, that the practice is illegal only if it can be shown that consumers are harmed.
Microsoft is accused of tying the “sale” of Internet Explorer (it is not really a sale since there was no separate price charged) to the sale or license of Windows. Judge Jackson concludes that the practice is a tying arrangement since “[n]o technical reason can explain Microsoft’s refusal to license Windows 95 without Internet Explorer 1.0 and 2.0” or, later, IE 3.0 and 4.0 (paragraphs 175, 176). But whether Windows and IE as “products” are technically separable cannot be the determinative point. Are consumers in general better off or worse off with IE pre-installed? Judge Jackson finds them to be worse off, but why? Most consumers want a browser, and as Microsoft improved Explorer, more and more were happy with Explorer. Nevertheless, concludes the judge, some consumers may not want a browser; others may want a different browser; those who get two browsers–Explorer and Navigator–will have less available memory and somewhat slower operations. These are grave consumer harms? Personally, I use both browsers, and am happy to have them–they have not come close to challenging the memory on my PC, nor have I noticed the extra milliseconds that result.
These are just some examples. I will be happy, if you like, to work through the various other Microsoft licensing restrictions. For most–perhaps, not all–there are legitimate pro-competitive explanations. There are some that might appear questionable, though the Judge’s explanation of them may not be complete. At various points, Microsoft appears to propose dividing the market–if true, clearly illegal–though, oftentimes, the proposal is rejected. Microsoft’s efforts to constrain OEMs and others from promoting Navigator requires some study and some thought. I found most of the others to be indistinguishable from normal promotional practices of any firm. As a consequence, they should not be found to be illegal under the antitrust laws.
