The Truth is Out There: The Microsoft Case Meets Market Realities

Abstract

In the Microsoft case, the Department of Justice (DOJ) applied Post-Chicago theories of strategic behavior to anecdotal evidence of Microsoft's behavior and obtained a judgment against specific conduct. This paper takes a critical look at the theories of the case and the industry facts to determine if any anticompetitive concerns could be justified. After setting the foundation with a discussion of software standards and an overview of the computer industry, we apply our nine-step formulation of the DOJ's monopoly maintenance model first to Microsoft's alleged attempt to control the world of Java and then to the browser wars. Regarding the Java case, one could claim Microsoft designed a plan to exclude middleware technologies from the market, but no real evidence suggested Microsoft was able to leverage its position into middleware. In contrast, regarding the browser case, the facts could possibly be interpreted to suggest at Microsoft had leveraged its position from operating systems into browsers, but such a move would not have excluded operating system competition. At best, the DOJ proved half of two different cases. Neither case survives a close review. Other monopolization theories are also discussed and rejected. The presentation concludes with a brief overview of a simple monopolization count through which Microsoft may have maintained their operating system monopoly through exclusionary conduct directed toward the Linux operating system.

Keywords: Microsoft, antitrust, monopolization, software, standards, Linux

JEL Classification: K21, L41, L42