Economist’s Guide to U.S. v. Microsoft, An

Competition Policy and Antitrust

Article Snapshot


Richard Gilbert and Michael L. Katz


Journal of Economic Perspectives, Vol. 15, No. 2, Spring 2001, pp. 25-44


This paper looks at the antitrust case against Microsoft.

Policy Relevance

Microsoft harmed consumers by reducing competition. But it will be hard for regulators to fix the problem.

Main Points

  • The FTC investigate competition concerns with Microsoft in 1990; the Department of Justice (DOJ) began an antitrust case against Microsoft  19 94, resulting in a consent decree in 1995. Further disputes arose, and DOJ renewed its suit in 1998.

  • Microsoft argued that its prices were lower than those a monopolist would charge, because of competition between different platforms. DOJ argued that Microsoft had too much market power because it would be too hard for another operating system to compete.

  • Netscape’s browers and the Java programming language threatened to create a crack in Microsoft’s monopoly armor that Microsoft took action against.
  • Microsoft’s conduct with respect to Java, Netscape, and Internet Explorer was deliberately intended to harm rivals.

  • Consumers might have benefitted in the short run from Microsoft’s actions, but in the long run consumers were harmed because Netscape and Java were undermined as competition.

  • The effect of splitting Microsoft into two companies on consumers and innovation is very hard to predict. But just asking Microsoft to conduct its business differently might not be effective. The best outcome of the case is that private antitrust suits can now be brought against Microsoft more easily.

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