Yes, Microsoft Hurt Consumers, a Washington Post op-ed by Foer and Lande

Washington Post op-ed, November 30, 1999

But Did Microsoft Actually Hurt Consumers?

Robert J. Samuelson emphatically answers 'no.' He says that Judge Thomas Penfield Jackson's findings of fact don't 'show how Microsoft's brutal competitive behavior has hurt consumers.' We disagree.

Samuelson correctly observes that Microsoft has market power and used this to force computer makers to favor Microsoft's Internet browser and cripple Microsoft's competitors. He concedes that their tactics were 'unfair,' but he believes this anticompetitive conduct did 'not much' hurt consumers.

Samuelson points out that Microsoft was giving away its browser for free. He admits that Microsoft's unfair conduct probably enabled it to charge excessively for Windows, but quickly adds that the effect on the price of Windows 98--which costs perhaps $89 in a $1,500 computer--is trivial. He also admits that forcing users who did not want a browser to have one degraded the performance of their PCs and increased the risk of bugs and incompatibilities (and, he should have added, caused lost time as employees browsed the Internet without authorization and inadvertently downloaded viruses). But he correctly points out that most PC users want a browser. So what's the big deal?

Samuelson's analysis leaves out a number of long-term and short- term consumer damages stemming from Microsoft's conduct. Fundamentally, this case was never about short- term harm. Its focus always was on allowing everyone in the computer field--not just Microsoft--to innovate. The theory behind the lawsuit is that in the long run only innovation, guided by the free market and consumer preferences, will produce products in consumers' best interests. Consumers lose if innovation is squelched by monopoly power. Consumers lose if innovation is inhibited or never brought to market because of anticompetitive conduct.

How do you estimate the value to consumers of an alternative operating system that never came into being because of Microsoft's multiple strategies of destruction? Competitive innovation is the key to consumer welfare in the information age. Its loss cannot be dismissed lightly.

Further, any time a company develops and gives away a product for free--as Microsoft did with its browser--we could naively say 'consumers benefit, look no farther.' Or we could realistically ask, 'Why would Microsoft deliberately lose huge amounts of money in the short term?' Answer: to make even more money in the long term. Do we have to ask who will pay these higher prices?

In the short term perhaps Microsoft only overcharged consumers $20 per operating system (and perhaps another $50 on Microsoft Office, etc.). But $20 times 200,000,000 computers is not a trivial monopoly overcharge.

Moreover, consumers desire much more than low prices. Judge Jackson found that many computer makers wanted to install 'shells,' or tutorials, on top of Windows to make their computers easier and simpler to use. Microsoft refused to allow computer makers to do this--to the detriment of every user not up to the level of those whose computer proficiency was deemed 'typical' by Microsoft's sophisticated and insulated programmers. Those who wonder why 'competition' has provided more and more complicated features on our PCs but has not made them more reliable or easier to use now know why this occurred. This lack of simplicity and reliability can be much more harmful to consumers than a $20 monopoly overcharge.

And recall that a consumer who wanted to have a computer maker install Netscape Navigator could not do so. Microsoft threatened computer makers with the loss of Windows if they dared add Navigator. Even if the user was one of those savvy enough to install Navigator by herself, when she actually had the nerve to use it she might get a nasty surprise thanks to the incompatibilities deliberately installed by Microsoft. Isn't real consumer choice supposed to be a prime goal of the antitrust laws?

The remarkable thing about Judge Jackson's ruling is not that he found the long-term harm to innovation that is the essence of the case. He also found numerous examples of short-term harm to consumers. There's no question that Microsoft hurt consumers severely.

Foer is President of the American Antitrust Institute and Lande is a law professor at the University of Baltimore.