The Microsoft Antitrust Cases: Competition Policy for the Twenty-First Century

Competition Policy and Antitrust

Article Snapshot

Author(s)

Harry First and Andy Gavil

Source

Cambridge, MA: MIT Press, 2014

Summary

Microsoft rose to dominance in the 1980s, like IBM and Intel. Between 1990 and 2009, authorities in the United States (US) and the European Union (EU) carried out antitrust actions against Microsoft. The outcome shows that competition law is relevant to the fast-changing high-tech sector.

Policy Relevance

A key benefit of the Microsoft antitrust cases was deterrence. The existence of multiple antitrust authorities benefits competition.

Main Points

  • Competition law authorities involved in the investigations of Microsoft included the Federal Trade Commission, the US Department of Justice (DOJ), multiple states, private firms, Korea, and the European Commission.
     
  • The US, the EU, and Korea imposed different remedies on Microsoft, allowing observers to see which were most effective; failure to break up Microsoft into three smaller competing firms limited the benefits of experimentation with remedies.
     
  • Debate between authorities as to how to evaluate dominant firms improved competition policy.
     
  • Judges and regulators clearly understood that features of the new economy, such as “network effects,” insulated Microsoft from competition.
     
  • Authorities acted too slowly to protect competition from Microsoft, as firms like Sun Microsystems did not survive and Microsoft remains.
     
    • When a dominant firm insists that antitrust protects “competition, not competitors,” authorities should be skeptical, as there is no competition without competitors.
       
    • Even when a case is resolved slowly, it can have an important deterrent effect.
       
  • The idea that competition would erode Microsoft’s power without intervention through “creative destruction” was exaggerated.
     
  • Microsoft’s products were new but its anticompetitive strategies were traditional.
     
  • The remedies in the Microsoft antitrust cases were partly successful.
     
    • Remedies imposed in the US and the EU increased competition from other software makers, especially open source.
       
    • Suits by private firms in the US, as well as fines imposed by the EU, deter bad conduct.
       

 

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