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How Much Has Bill Overcharged America?
I haven't seen any figures here yet as to how many dollars we're
actually talking about--nothing on the industry's total sales, Microsoft's
revenues (hardware, software), it's reported total/unit costs, net profits,
and so on. The Heritage Foundation--in its defense of Bill--gives us these
1. 1996 'Computer Industry'
2. Microsoft's 1996 'Computer Industry' Sales..........$ 10 billion
3. Industry's 1996 'Software Revenues'......................$ 250
4. Microsoft's 1996 'Software Revenues'.....................$
9.4 billion (4%)
If Bill Gates really has serious monopoly power in the computer
industry, it is likely that the 'costs' he has imposed on it extend far
beyond the 'paltry' $10 billion or so he reels into the Microsoft coffers
each year. On the basis of our century of U.S. antitrust experience, we
would expect that a removal of his monopoly would (a) drastically deflate
his own $10 billion 'take' in 2 ways, by collapsing his unit prices and
squeezing the waste out of his unit costs, plus (b) dramatically shrink the
overall (and unit) costs of the REST of the computer industry, including
both the hardware and software sides. In other words, ending a monopoly in
a 'small' but key segment of an industry almost invariably brings a vast
reduction in its OVERALL costs, prices, and total revenue. The lack of
competition generates bloat and unavoidable inefficiencies that pyramid
throughout the choked industry.
Historically, successful monopoly cases have caused industry
revenues (units sold times price, or total cost to the consumer) to drop by
some 10% to as much as 75%--most frequently something in the roughly 30%
range. A conservative estimate here, for example, would suggest that Bill's
monopoly is costing the consumer at least 10% of the overall computer
industry's $570 billion in yearly sales, e.g., $57 billion per annum.
As that good ol' boy from Illinois, Senator Ev' Dirksen, once
reminded us, "A billion here, a billion there, pretty soon you're talking
about real money."
Charles Mueller, Editor
ANTITRUST LAW & ECONOMICS REVIEW