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How Will We Know Who Won?
Once upon a time, the Antitrust Division of the U.S. Justice
Department was an impressive fighting force for the American public. (FDR's
trustbuster, Thurman Arnold, comes to mind.) It went to court
routinely--and it won. Afterwards, prices fell and monopoly market shares
dropped. Since about '75, it's been in the business of drafting 'consent
decrees'--corporate averments that they've never sinned since the charter
was first bestowed but that, by golly, they'll nonetheless go and sin no
more. Today, the Justice Department lacks only 2 things to beat Bill
It can be safely predicted, then, that--as I've said before--Bill
will win again. How does a toothless government bureaucracy like the
Antitrust Division beat someone who has $40 billion in his pocket--in a
court (D.C. Circuit) appointed by Ronald Reagan? (Remember the judges who
picked Kenneth Starr to pursue Clinton?)
How will we know who won? Bill currently has a monopoly, right, an
80% to 90% share of the OS market, the only one that really counts? And he
engages in some "unfair" methods of competition--tying and so on--right?
And both his monopoly and his unfair practices have some antisocial
"effects," like inflated prices to the public, suppressed technologies, and
so on? Ah, but can it all be PROVED by the wimpish DOJ lawyers--while being
muscled around by Gates' top legal guns--to the satisfaction of Reagan
judges, who've never seen a monopoly they didn't love? (I reviewed the
antitrust cases decided by the D.C. Circuit for the 5-year period 1986- 91
in my journal--a total of 28 cases--and found no decision for an injured
plaintiff. Vol. 24, No. 4, pp. 15-26. The guiding antitrust principle of
this pro-monopoly court is, the defendant always wins.)
Bill holds all the cards because he knows that the D.C. Circuit
Court is in his pocket. He knows its Reagan judges hate antitrust, that
they'll set aside anything he asks them to. So he'll agree to a little
tinkering with the 'consent decree' he's now accused of violating--to clear
up any 'ambiguity' in the language his lawyers put in last time--and the
Justice Department will announce a great victory for the 'consumer.' Bill's
PRICES will of course be unaffected. His practices--the exclusion of his
competitors from all the markets that count--will go on, albeit under
perhaps other names. His market SHARE--the 80% to 90% of the OS market that
gave him his modest current $40 billion--will remain undisturbed. His
Microsoft STOCK price will go UP another notch. His monopoly marches on.
Bill won. DOJ lost.
The way way one tells who won an antitrust case is straightforward:
Did the monopolist's price FALL--and by how much? Did his stock price
plummet? Did the monopolist's market share shrink--and by how much?
They're connected: Until his market SHARE is punctured, his price won't
drop. If there are no real changes in these 2 numbers, Bill won. The U.S.
Ralph Nader's 'Appraising Microsoft' conference of November 13 and
14, 1997, will come and go. It will generate a lot of words but, in my
view, neither it nor the Justice Department's current challenge to Bill will
produce serious economic results. Nader won't ask for a break-up of Gates'
90% share of the OS market. And without that, nothing will change.
Charles Mueller, Editor
ANTITRUST LAW & ECONOMICS REVIEW