* Microsoft & Anti-trust

Topics: Regulation
18 Jul 1994


Really From: ervan@cs.rice.edu (Ervan Darnell)

Saturday, Microsoft & the so-called Justice Deparment reached a consent
decree wrt to Microsoft's allegedly anti-competitive licensing
arrangements. The arrangement in question was one where Microsoft
allowed hardware manufactures to include MS-DOS preloaded on their
machines for a fixed price per machine (and not per actual installation
of DOS).

In the real world (not the one the Justice Department inhabits), this
makes a lot of sense. First, essentially every Intel machine sold is
sold with/would be sold with MS-DOS. Therefore this kind of arrangment
simply makes for easy accounting. Microsoft doesn't have to worry
about manufacturers finagling the number of machines that actually had
DOS loaded (which would be much easier than lying about the number of
machines sold). Neither party has to worry about the overhead. The
manufacturers just load it up and go. Microsoft doesn't have to worry
about piracy of MS-DOS so much since everyone has already bought it.

If manufacturers don't like this pricing arrangement, no one is forcing
them to accept it. MS-DOS is still readily available as a separate
product at a reasonable (by historical, not technical standards) price.
If you don't like the package deal, don't take it, duh.

As for other OS's being crowded out, hardly. MS-DOS in bulk runs about
$20-$30 (I think). Anything that someone would want to replace it with
either costs $200+ or is free. It's just silly to think bundled MS-DOS
has hurt this market. Manufacturers would rather burn the $20 than
worry about it (or at least rather have the discount for all of their
other machines).

Third, customers like preloaded software. It removes one of the
daunting aspects of using PCs for man people. This decree doesn't
prevent that but it does complicate it.

Also included in the decree was that Microsoft could no longer
stipulate minimum purchases nor could sign any contracts for MS-DOS
sales of longer than one year duration. We can all pay more for
both those induced inefficiencies.

I suppose that's the bottom line. The Justice Department didn't really
do anything to address the presumed underlying problem, that Microsoft
was competing unfairly by abusing its market position, rather it just
decided that Microsoft was too successful. Anyone doing that well must
be doing something wrong. So, they settled for crippling Microsoft a
little bit here and there.

There is an wider point here. Many people who are mostly libertarian
consider anti-trust law to be one of the few remaining things the
government must do. I even fell into that trap some number of years in
the past. But, now I think the following two things are true:
1) All government efforts to enforce anti-trust are like the
above, punishing success instead of 'correcting market failure'
(excluding the case of government breaking up its own protected
monopolies). That is, anti-trust is a pragmatic failure.
2) Certain monopolies can be efficient. Protected ones obviously
are not. Ones that achieve their position without coercion
serve a purpose, albeit not always a obvious one. That is, anti-
trust is flawed in theory as well as practice.

Liberals are all in favor of price controls until they see (oh say)
rent control and homelessness in N.Y. versus Houston, and then some
still don't get it. But at least most are driven to the conclusion
that rent control as it's practiced doesn't work. They set about
fixing the current problems and a rare one will see that it can just
never work. I submit that libertarians and anti-trust law follow the
same pattern.