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POLICY BRIEF FROM AMERICANS FOR TAX REFORM

Taxpayers Protest the Antitrust Vendetta Against Microsoft

 Consumers Benefit from Windows and Free Internet Browsers

Back Off, Mr. Klein, or the People Will Throw You Out of Office

 By Peter J. Ferrara
April 10, 2000

U.S. District Court Judge Thomas Penfield Jackson recently issued over 200 pages of Findings of Fact in the antitrust case of U.S. v. Microsoft, brought by the U.S. Justice Dept.  In the findings, Judge Jackson buys the allegations of the Justice Dept., laying the groundwork for what would apparently be an ultimate legal ruling against Microsoft in the case.

But the 200 plus pages fail to demonstrate any real, significant, consumer harm caused by Microsoft.   Instead, the Findings show the following enormous consumer benefits produced by Microsoft:

  • Microsoft began offering an Internet browser in 1995, called Internet Explorer.  The browser allows consumers to surf the World Wide Web far more easily.  At that time, Netscape had an effective monopoly with its browser, called Navigator, which served 90% of the market.  All of Microsoft's actions in the ensuing battle with Netscape's Navigator, which are recounted in 130 pages in the Findings of Fact and supposedly show Microsoft abusing its market power, in reality amount only to Microsoft competing fiercely to break the Navigator monopoly, which it ultimately did.  Today, Internet Explorer and Navigator each hold about 50% of the market.  Moreover, last year America Online still found Netscape worth $4.2 billion, which it paid to acquire the company, ensuring Navigator will remain a leading competitor in the future.  Breaking up this monopoly certainly benefited consumers.
  • When Microsoft first offered its browser, Netscape was charging almost $50 for Navigator.  But Microsoft provided Internet Explorer at no charge.  As a result, the price of Navigator and every other browser was forced down to zero, with providers receiving collateral benefits from the use of their browsers.  This was certainly a great boon to consumers.
  • Indeed, even Judge Jackson was constrained to write in the Findings of Fact,

"The debut of Internet Explorer and its rapid improvement gave Netscape an incentive to improve Navigator's quality at a competitive rate.  The inclusion of Internet Explorer with Windows at no separate charge increased familiarity with the Internet and reduced the cost to the public of gaining access to it, at least in part because it compelled Netscape to stop charging for Navigator.  These actions thus contributed to improving the quality of Web browsing software, lowering its cost, and increasing its availability, thereby benefiting consumers."

  • In addition, for 20 years Microsoft has been among the innovation leaders in the most rapidly innovative industry in world history, producing enormous, incalculable benefits worldwide.   Microsoft's development of Windows has made computers far easier to operate for average consumers.  That has been the foundation for the explosion of computer technology, and the development of the Internet.  This in turn has been at the root of the economic boom in America during the 1990s, which has reverberated throughout the world, producing enormous, incalculable economic benefits and other major gains.

In contrast, the following are the supposed consumer harms that the Findings of Fact fancy Microsoft as causing:

  • By using its Windows operating system to aggressively market Internet Explorer, while not allowing it to be used to market Navigator, Microsoft allegedly made choosing Navigator more difficult for consumers.  But Navigator has long been available in CD-ROM ubiquitously, including through mass mail distribution.  It is easily and readily available to consumers who want to choose it.  Moreover, forcing the price down to zero from $50 certainly made choosing Navigator much easier, not harder.
  • Another supposed consumer harm is that Microsoft prevented manufacturers from removing Internet Explorer from the Windows operating system on any computer they sold.  This supposedly deprived consumers of the choice of buying a computer without an Internet browser.  But a computer without a browser is no longer an up-to-date computer, and it is provided free of charge.  Even consumers who don't think they need a browser now may decide they need it later.  The browser can always be easily disabled on a computer available to workers or students to prevent them from cruising the Internet inappropriately.  Consumers can also always buy computer without Windows and add operating systems offered by others, without a browser. 
  • Consumers could replace Internet Explorer with Navigator for their own use.  But Internet Explorer would remain within the operating system on any computer using Windows and could be called back later.  This supposedly damages computer performance and weakens memory, but this effect is insignificant.  Unfortunately, it is greatly exaggerated in Judge Jackson's findings of fact.
  • Microsoft also prevented manufacturers from adding messages and instructions to the opening of Windows on a new computer.  This supposedly made educating consumers about how to use their new computers more difficult.  But there are multitudinous other ways for manufacturers to get messages and instructions to their buyers, and Windows has its own explanatory system.  Moreover, setting up a new computer today is not at all difficult for consumers.
  • The guts of the antitrust vendetta against Microsoft is that the Justice Dept. thinks Microsoft's market conduct is actually stifling innovation.  Apparently, Justice's antitrust lawyers are now going to spearhead innovation in the computer industry where Microsoft has failed.  This is transparently ridiculous.  For almost 20 years, Microsoft has been among the innovation leaders in the most rapidly innovative industry in world history.  The pace of innovation in this industry is so fast that even the industry leaders can barely keep up with it, and consumers' heads are left spinning.

No doubt, Microsoft will do what it can to prevent new developments from displacing its market position.  But this one firm cannot stop the progress of science and technology.

In short, therefore, the supposed consumer harms outlined in the Findings of Fact are tortured, exaggerated, trivial, often wholly fanciful, and otherwise greatly overwrought.

Finally, there is no possible antitrust remedy in this case that will improve consumer welfare.  Regulation of the computer industry, effectively administered by the Justice Dept. and a Federal court, would be a disaster for consumers, ultimately retarding innovation, increasing costs, and reducing competition.  Breaking up Microsoft would deprive consumers of one of the most rapid innovators and fiercest competitors in the whole computer industry.  It would also ultimately trample on the rights to property and freedom of contract of all of us.

Therefore, in conclusion, we offer Mr. Joel Klein, Assistant Attorney General for the Antitrust Division in the Justice Dept., our own, people's findings of fact.  Mr. Klein, you have not shown that Microsoft's offering of a free Internet browser, or anything else Microsoft has done, has really harmed consumers.  Rather, your suit is just a gross waste of taxpayer funds.  If you want to stimulate innovation in the computer industry, you should resign from the Justice Dept. and go start your own computer company.  Meanwhile, if you don't back the heavy hand of big government out of the computer industry and stop wasting taxpayer funds, the people will rise up in the next election to throw you and all of your superiors out of office.