NCPA - National Center for Policy Analysis

Market Share Doesn't Define A Monopoly

April 12, 1999

A Business Week editorial says: "According to Justice, Microsoft's market share rose from 93 percent in 1991 to 95 percent last year." Those figures came from Exhibit One in the Justice Department's antitrust case -- the first of 1,430 -- which was adapted from a 1997 study by the International Data Corporation (IDC).

But Justice redefined the "market" to include only "Intel-based," single-user computers -- conveniently excluding Microsoft's most famous rivals. For example:

  • Apple's share of personal computer sales hit 9.6 percent in the final quarter of 1998, according to PC Data.
  • Sun computer sales rose by 30 percent last year -- including expensive servers, commonly networked to many workstations.
  • Sun also makes an operating system, Solaris, that runs on Intel-based computers, but its products are invariably part of a business network.
  • Windows CE has only 25 percent of the market in subnotebooks and handheld computers, which grew 61 percent last year to nearly four million -- with projected sales above 13 million within two years.

And when it comes to set-top devices linking TV to the Internet, Windows CE also faces formidable competition from Sun and a Sony- led consortium.

The government's market definition leaves only a few competing operating systems -- mainly Linux, a desktop version of UNIX. Millions of copies of Linux have been downloaded for free, and IDC reports an additional 2.9 million copies were sold in 1998 -- a 48 percent increase from 1997.

Apple and Linux alone are likely to hold Microsoft's share of desktop shipments to little more than 70 percent this year.

Microsoft is a dominant firm, and dominant firms are the norm in high tech. Reynolds says executives of other dominate firms should think twice before encouraging prosecutors and reporters to define monopoly as a large share of an artificially tiny market.

Source: Alan Reynolds (director of economic research, Hudson Institute), "The Monopoly Myth," Wall Street Journal, April 9, 1999.


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