The Case Against The Case Against Microsoft: New Study Criticizes DOJ Case

The Case Against The Case Against Microsoft: New Study Criticizes DOJ Case

April 27, 1999

Washington, DC, April 27, 1999 – Are Microsoft’s current business practices hurting consumers? A new study by Barry Fagin, Senior Fellow in Technology Policy at the Independence Institute and CEI adjunct scholar, shows that despite the claims of the Department of Justice (DOJ), consumers have not been hurt by Microsoft. Rather, consumers have benefited from Bill Gates’ vision and achievement. DOJ’s lawsuit against Microsoft resumes in the next few weeks.

"Once consumers are ‘locked in’ to Windows, a monopolistic Microsoft should raise its application prices through the roof. In fact, is has done no such thing," Fagin states in the study, The Case Against the Case Against Microsoft. "Taking a longer-range view and looking at the past ten years, the cost of new Windows license increased by 9.6 percent. This appears rather minor, given that over those ten years, Microsoft changed Windows to become a significantly more advanced, more powerful, more feature-loaded product. Also, the prices of consumer applications such as Word and Excel have dropped considerably. Between 1995 and today the price of Word and Excel have each fallen $23."

Fagin’s study, published by the Competitive Enterprise Institute (CEI), continues to poke holes in the DOJ case against Microsoft and questions the ability of the 100 year old antitrust laws to benefit the high-tech industry and consumers.

"Operating systems (OS) provide needed standardization, the ability to run the same programs, like word processors or spreadsheets, on different computers," Fagin explains in the study. "Attempts by firms to address the standardization/innovation tradeoff are necessary to promote consumer welfare – but may still be interpreted under traditional antitrust theory as restraining trade."

As this study points out, software prices are falling, Microsoft makes upgrades available at a reasonable price, and continually works to improve its product – hardly the behavior of a monopoly. "The government’s role is to ensure that Microsoft (or any other company) honors its contractual agreements. Interfering in the voluntary actions of consumers is bad economics, bad law, and bad policy," Fagin concludes.

CEI is a non-profit, non-partisan research and advocacy group dedicated to the principles of free enterprise and limited government. For more information, please contact Emily McGee, director of media relations, at 202-331-1010.