AAI Statement on Consumer Harm in the Microsoft Antitrust Trial

The following is a statement by Albert A. Foer,President of the American Antitrust InstituteRegarding Consumer Harm in the Microsoft Antitrust Trial

"Both sides in the Microsoft antitrust trial will be in court today to defend their findings of fact before Judge Jackson. The Judge must decide whether the government has proven its case against Microsoft, demonstrating illegal monopolistic behavior.

"Microsoft claims that the government has not shown sufficient consumer harm. Although Microsoft denies being a dragon, it says, in effect, if it were a dragon, it should be praised and patted on the head as a good dragon. The evidence appears to me otherwise. Indeed, what is at stake is larger than Microsoft's current control of the PC operating system market. By dominating this platform, and if left unchecked after this case, Microsoft will continue to leverage this monopoly and move to dominate markets that have even more far-reaching effects on our lives and the economy.

"It is no secret that business on the Internet is the fastest growing sector of our economy. Imagine not just a nation but a world in which information flow, electronic commerce and even the content that we view on the Internet are all dominated by one company. That is what is at stake.

"The government laid out a clear case of behavior showing a company that has put maintenance and exploitation of its monopoly first, and consumers last.

"Consumer harm boils down to three basic issues: choice, innovation and price. It is clear that consumers have no choice in the operating system market. Consumers know that Microsoft controls more than 90 percent of the operating system market.

"Microsoft claims that despite this lack of choice for consumers, it has still innovated. Nothing in economic theory says that monopolists can never innovate; they will do so when they see it as in their interests. Microsoft's "innovations" were designed solely to capture and maintain its monopoly, and they have not hesitated to block innovations that would benefit consumers. An example of this was presented at trial by an IBM executive. IBM wanted to provide consumers with a user-friendly start-up screen for novice users. But Microsoft, worried that its logo would not be as prominent in the start up sequence, refused to allow it. Because it has a monopoly on the operating system, it can dictate terms like this to computer manufacturers.

"Finally, substantial evidence at trial demonstrated how prices for Windows have been exempt from competitive pressure. While prices for practically every component of the computer have dropped over the last several years, the price for Windows continues to rise. The Consumers Federation of America estimated this overcharge could be as much as $20 billion for consumers. Microsoft has been extraordinarily profitable for many years, reflecting its enduring monopoly power. While this profitability has been good news for shareholders, it has been derived to some significant extent from the pockets of Microsoft's consumers, who were deprived of the advantages of a more competitive market.

"If Microsoft's behavior was less cunning and calculated, as reflected in its own emails and internal documents, we might be less concerned about the threat of its dominating future markets. The consumer harm in this case, however, shows that Microsoft will let nothing get in the way when it is determined to capture these new markets, destroy competitors and lock-in consumers."

The American Antitrust Institute is an independent non-profit research, education, and advocacy organization whose mission is to increase the role of competition, assure that competition is fair, and challenge unduly concentrated power in the American and world economy.