- The Washington Times - Thursday, March 30, 2000

Poor Judge Thomas Penfield Jackson is in over his head. He is on the spot, with his final decision on the Microsoft monopoly case now delayed until early next month.

Being a good 19th century man, he knew Microsoft was big and, therefore, presumably a monopoly. This was obvious pretty much from the beginning in 1997, when he placed a preliminary injunction against Windows and was overturned by a unanimous appeals court. He needed a "special master" expert to organize the facts for him. The court proceedings were a formality, with Microsoft a monopoly almost by definition. Yet, in lieu of simply ruling that Microsoft should be busted into parts, he brought in economics expert Judge Richard Posner to force a settlement, negotiations on which are now continuing.

The essence of the prosecution is that Microsoft was trying to monopolize the Internet by forcing its Internet Explorer software to be a gatekeeper for everyone trying to log on to it. It did this by exclusively placing its Internet software's icon on its Windows operating system desktop. Windows was so widely utilized as the initial operating system of computer manufacturers that no other browser supposedly had a chance. Yet, at the time of the suit, competitor Netscape accounted for 50 percent of browser usage proof that users were able to place it in the Windows system. Even a computer illiterate can put the Netscape icon on the Windows desktop. Even yours truly.

The judge apparently could not grasp this. No matter who said what to whom, that essential fact stands. It is difficult to understand Judge Jackson's point.

The problem is that the judge and the Clinton Justice Department used the "Alice in Wonderland" method guilty first and then the reasoning.

Thus, the DOJ first required that Microsoft remove Explorer from the Windows package and, when it realized it could not be easily removed, said it should not be placed visibly on the desktop but hidden so no one could see it. When that did not fly, DOJ filed the antitrust suit. Whatever, so long as Microsoft was the bad guy.

The special master turned out to have written in a hostile manner about Microsoft in the past but was allowed to continue anyway. It was his "facts," though, that set Judge Jackson's decision. Even then he wanted Judge Posner to force a solution upon Microsoft, rather than simply issue a remedy thereby not risking that an appeals court might overturn him again.

Like most of his generation, Judge Jackson had an old-fashioned view of market competition; unfortunately, one with some basis in the law. In recent years, regulators and courts have recognized its obsolescence and so found means to ignore the bad economics.

Yes, big companies do play hard to maintain or expand their dominant positions. They do make the toughest deals they can, in Microsoft's case with computer manufacturers who desire their operating systems. Yet, that is not wicked "monopoly power" but precisely how Adam Smith and his more modern interpreter, Joseph Schumpeter, expected that the market should work. However, this seems unfair to a generation of Keynesian economists with progressive inclinations, and roots back to David Riccardo. But modern economists have learned that simplistic Riccardian models cannot manage complex competition.

Nevertheless, the Clinton antitrust cops rushed in to regulate competition where wise men in the recent past have feared to tread.

Microsoft, on the leading edge of the technology of ideas (i.e., software), must always be threatened with a new idea that could obsolete its business. To the great embarrassment of the government, the market did not wait long after its suit to prove the case. Not a month after DOJ charged Microsoft for "unlawfully taking advantage of its Windows monopoly to extend that monopoly" to its Internet-browsing software, five other giants created a joint Internet access plan to freeze Microsoft from the whole Internet business. Which was the monopoly? The poor government regulators just cannot get it right.

The whole antitrust business is almost embarrassing. Just consider one little enigma. In the old days, the five (International Business Machines, Netscape Communications, Novell, Oracle, and Sun Microsystems) would have been charged with "collusion," one of the mortal sins of the antediluvian magic called antitrust law.

Fortunately, modern economics is beginning to understand old Joe Schumpeter, who demonstrated long ago that the market is just too dynamic for creaky bureaucrats to manage competition. It is like nailing Jell-O to a wall.

Today's monopolist is tomorrow's outflanked failure. Remember the old U.S. Steel monopoly? It hardly produces steel today. Remember when General Motors was able to charge anything it desired? Today, its profitability is in question. Was not IBM the monopolist in computers a few years ago?

Or remember in 1995 when Microsoft was last thought to be dominating Internet access before Netscape actually did? The market just keeps churning market share; then someone else is on top (for a while). That is how markets work. Judges, politicians and bureaucrats who cannot understand must always risk looking foolish.



Donald Devine, former director of the U.S. Office of Personnel Management, is a columnist and a Washington-based policy consultant.

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