NCPA - National Center for Policy Analysis

Risks Greater Than Rewards In Microsoft Suit

July 6, 1998

The Justice Department is posing greater risks than any possible reward in its suit against Microsoft, Richard Epstein of the University of Chicago Law School charges. He contends that pure competition is unattainable in network industries -- where the success of each firm depends on cooperation with its rivals.

  • Epstein urges Microsoft to acknowledge a monopoly position in operating systems -- which creates some duty toward competitors.
  • During the Reagan years, economic theories from the University of Chicago held that antitrust laws were intended to protect consumers -- rather than to help competitors and provide employment for lawyers.
  • The limit of that duty is to make sure that competitors can interconnect their browsers to Microsoft's operating system -- just as trains from one line can run over the tracks of another -- and he finds that condition satisfied under current arrangements.
  • Thus, he finds that Justice is overreacting with its massive assault -- which can only undermine research and innovation, and compromise intellectual property rights.
  • Not only is Justice's action diverting Microsoft's resources from making and marketing new products, in his view, but it will discourage potential innovators from conquering a high-tech market for fear the department will take away their hard-earned winnings.

He also takes to task those states which accuse Microsoft of predatory pricing of its Office Suite package. Since there is no networking issue involved, rivals can flock to the scene at the first sign that Microsoft has stumbled.

Source: Richard Epstein (University of Chicago Law School), "Monopoly is Bad. Trustbusting Can be Worse," Wall Street Journal, July 6, 1998.


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