NCPA - National Center for Policy Analysis

States Want to Strip Down Microsoft Windows

May 24, 2002

Despite the settlement of the U.S. Justice Department's antitrust case against Microsoft, nine states are continuing their suit. They demand that Microsoft license a stripped-down (no browser, no video player) or "modular" version of its Windows operating system to computer manufacturers.

The states maintain that this would increase competition because consumers would turn to Microsoft rivals for "add-ons" to the basic Windows program. Consumers would benefit from the increased competition.

But competition would not be increased in any beneficial sense, says economist and antitrust expert Dominick T. Armentano.

To see this, suppose that the government required General Motors to ship Buicks without steering wheels or radios.

  • Consumers would either turn to other brands of automobiles that were available complete, or in order to have a functioning Buick they would have to assemble the necessary parts from other suppliers.
  • While this would help rival car manufacturers and aftermarket parts suppliers, it would reduce the efficiency of the auto market, and consumers would be worse off because of the greater inconvenience.

The competitive advantage or greater efficiency that one firm offers consumers does not exclude would-be competitors from the market. When some entrepreneurs are excluded by consumer choice or foreclosed by efficiency from a market, it only means that consumers are reasonably satisfied with existing suppliers and will not support additional competitors. It does not mean that markets have "failed" or that there isn't enough competition.

Whether the product is cars or computer programs, implementing the states' theory of competition would discourage innovation. There would be no incentive to keep improving a product if competitors can use antitrust claims to strip away the value of the investment.

Source: Dominick T. Armentano, "The States vs. Microsoft: Does a Modular Windows Make Sense?" May 13, 2002, Independent Institute, 100 Swan Way, Oakland, Calif. 94621, (510) 632-1366.


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