ARTICLE SUMMARY
Summary:
Over time, dominant tech firms like IBM have been displaced by rivals. Antitrust enforcement spurred changes to IBM’s behavior that enabled the rise of a competitive software and computer industry.
POLICY RELEVANCE
Policy Relevance:
Without antitrust enforcement, dominant firms might maintain their dominance.
KEY TAKEAWAYS
Key Takeaways:
- Between the 1980s and the 2010s, dominant firms such as IBM were bested by Microsoft, and Microsoft in turn lost market power to firms like Google and Facebook.
- The constantly accelerating technological change that causes dominant firms to lose ground to newcomers might be just a phase, or a function of market structure.
- IBM lost dominance not only because of technological change, but because it was subjected to an antitrust lawsuit; the "policeman at the elbow" of a firm can change the firm's conduct.
- IBM's management was influenced by the investigation; lawyers came to dominate meetings, and discussions of market share or competitors' products was avoided.
- IBM abandoned its practice of bundling software with hardware; unbundling played a significant role in creating an independent software industry.
- Partly because of antitrust concerns, IBM signed a nonexclusive contract with Microsoft to develop the operating system for IBM's personal computers; ultimately, IBM was unable to control the PC market.
- Without antitrust, IBM might have purchased Microsoft or other competitors.
- Antitrust enforcers should consider how a dominant firm might try to influence or control future markets, and they should think about how dependent other firms are on a product or service.
- Antitrust enforcers should seek maximum remedies when they do bring a case, to spur the targeted firm to change.
QUOTE
TAGS
About Tim Wu
Tim Wu is the Julius Silver Professor of Law, Science and Technology at Columbia Law School. Widely known for coining the term net neutrality in 2002 and championing the equal access to the Internet, Professor Wu teaches about teaches antitrust, copyright, the media industries, and communications law, and his writing addresses private power, free speech, and information warfare.
