An epoch ago, when I worked at the daily newspaper, one of my jobs was pricing “we-prints” — commercial print jobs we ran on our presses for inclusion in the newspaper. By printing an advertiser’s material along with the rest of the newspaper, we saved them the cost of inserting their promotion into it later.
Our general counsel explained the ground rules. Our distribution system, he explained, was a de facto monopoly. Our monopoly position meant we had to cover all of our real costs plus a profit margin — selling below cost would have violated the antitrust laws.
Until now, I’ve avoided writing about Microsoft’s difficulties with the Department of Justice, since this issue doesn’t affect how you manage your IT department. However, it does concern all of us in the industry — and the amount of point-missing and red-herring chasing on the subject seems so excessive that I’ve changed my mind. So here are a few popular ideas about the subject, and why they’re just plain wrong. Caveat: I’m not a lawyer — these are informed, rather than authoritative, opinions.
Popular Idea #1: The only monopolies are created by legislation. Ironically, I’ve seen this printed in the daily newspaper, a de facto monopoly in many cities. Most airports are now dominated by a single carrier. Most desktops run some version of Windows.
This particular bit of silliness is based entirely on ignorance. The antitrust laws were, in fact, created to control the de facto monopolies of the day — big oil companies — and their favorite anti-competitive tactic. Big oil sold gas below cost to drive competitors out of business. Then it jacked prices way up.
Popular Idea #2: We should let the market, not the government, decide. The market has decided. It’s given Microsoft a monopoly in the desktop operating system market, and Justice isn’t trying to reverse that decision. Nothing in any Justice Department action tries to give an artificial advantage to alternative operating systems.
Antitrust laws kick in when significant competition doesn’t exist in a market. IBM has given up on OS/2, Macintosh sales have collapsed, and most software developers publish solely on Windows. The notion that the operating system marketplace is competitive is a fantasy. Antitrust laws apply to this situation.
Popular Idea #3: Microsoft should be free to decide what is part of the operating system. If Microsoft had waited, merging Internet Explorer and Windows Explorer into a single Windows 98 utility, I doubt Justice or anyone else would have taken action.
Internet Explorer isn’t part of Windows 95, though, any more than it’s part of the other operating systems you can get it for. Proof: As astute observers have pointed out, Microsoft categorizes Internet Explorer under Business Software on its Web site. You won’t find it listed under Operating Systems, even as a hypertext link.
Internet Explorer is an application, not an OS function. Microsoft bundled some OS kernel updates and some Internet Explorer functions into the same DLLs. That’s all.
Popular Idea #4: Since Netscape gives away its browser too, why shouldn’t Microsoft? Because of its desktop OS monopoly, Microsoft gets to bundle Internet Explorer into PCs as they ship. Netscape’s customers have to download it. A free market doesn’t ask consumers to make purchase decisions based on the greater good, only their own — and even free, Netscape costs more than Internet Explorer.
The parallel with our we-print situation is exact: in both cases a monopoly in distribution confers an unfair advantage and requires the company with the monopoly to sell its product at a profit.
Popular Idea #5: Microsoft shouldn’t be penalized for its success. Microsoft isn’t being penalized for its success. Should it lose in court, Microsoft will have been penalized for violating the consent decree it signed, and the antitrust laws of this country.
Microsoft’s existence depends on enforcement of intellectual property laws. Just like you and me, it has to obey the others, too — it doesn’t get to pick and choose.
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