NCPA - National Center for Policy Analysis

Microregulations for Microsoft

May 2, 2000

Government regulators have proposed breaking up Microsoft in an effort to restore competition to the software industry. However, critics contend they are doing just the opposite: destroying a key competitor in order to save competition. The problem, they add, is that the government wants to both break up Microsoft and continue to regulate it.

According to the plan proposed to U.S. District Judge Thomas Penfield Jackson, the government would split Microsoft into separate firms, one controlling the Windows operating system, the other holding the applications such as word processing and money management.

Theoretically, the first firm will get applications to compete against the second, and the second will provide applications to operating systems competing against Windows.

If Judge Jackson agrees, it would be one of the biggest breakups in U.S. history.

However, the government proposal doesn't end there. Regulators would also impose what Wired magazine calls "extraordinarily strict government regulations" on Microsoft that would last three years after a breakup. Among the rules:

  • No sale prices on Windows to computer makers.
  • No sale prices to software and hardware developers in exchange for promoting Microsoft products.
  • The government would have access to e-mail from all Microsoft officers, directors and managers for up to four years.
  • The company would have to track all changes it makes to Windows that might -- or might not -- slow down the performance of third-party applications.

If regulators don't like what they see, Microsoft could wind up back in court asking for permission to improve its products. That, critics say, sounds like a blueprint for progress on the order of the U.S. Postal Service, a monopoly the Justice Department managed to overlook.

Source: Editorial, "Break Up The Regulators," Washington Times, May 2. 2000.


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