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The weekend edition of the Wall Street Journal (August 24-25, 2013) carried a front-page story titled “CEO Exit Sets Microsoft on New Path,” by Shira Ovide. The opening sentences report Microsoft “finds itself beset by competition on all fronts” and the company’s “Windows operating system will still power nearly all the 305 million personal computers expected to be sold globally this year, according to research firm Gartner Inc. But it will run just 15 percent of all computing devices, if PCs, smart-phones, tablet computers and other gadgets connected to the Internet are lumped together, given the rise of rivals such as Apple Inc. and Google Inc.”
The article was accompanied by a graphic illustrating the dramatical decline in Microsoft’s market value since 2000 (from $603 billion to $290 billion) while other competitors grew (Apple, for example, from $18 billion to $495 billion) and new competitors have emerged from nowhere (Google, worth $290 billion, and Facebook worth $99 billion).
This got me to thinking… didn’t we publish a book about Microsoft around 2000 that predicted something like this would happen? Indeed, we did. In 2001 we published Antitrust after Microsoft: The Obsolescence of Antitrust in the Digital Era by David Kopel. In 2002, my comments about a proposed Microsoft antitrust settlement were selected by the U.S. Department of Justice as one of just 47 “major” letters out of 30,000 submitted, and one of only 5 in favor of the settlement, to forward to the U.S. District Court for the District of Columbia, which eventually approved the settlement.
Heartland launched its Center on the Digital Economy in 1999 to study changes in public policy made necessary by the sweeping social and economic changes caused by the emergence of the digital economy. Antitrust after Microsoft was the first publication of the new center.
Kopel wrote, “the decade-old fear that Microsoft would monopolize the Internet seems far-fetched” (p. 7). “Computing is already moving far beyond the boundaries of the desktop POC, as Internet-only devices and devices that replace personal computers begin to take off. To worry in the year 2000 that Microsoft will own the future of computing because of its strong position in the desktop PC market is like worrying in 1938 that the Mutual Broadcasting System would own the future of electronic entertainment because of its strong position in radio” (pp. 32-33).
Many people did in fact worry about Microsoft’s “monopoly powers” back then. Microsoft was being sued for violating a variety of federal antitrust laws, many of them vague and of no value to consumers. The government sought to break up Microsoft into two companies, one selling Windows and one selling everything else, and forbidding the two companies from ever cooperating. The DOJ actually got a judge (Thomas Penfield Jackson) to issue a decision ordering that “remedy,” but it was reversed on appeal.
Reading through Kopel’s book today, I’m struck by how prescient he was in his forecasts of changing technology, emerging competition, and the deadening influence of antitrust law in this arena of rapid change. Kopel’s concluding sentences still ring true today, a dozen years on:
If the Microsoft case is the best the Antitrust Division has to offer America, then there is nothing of value in the Sherman Act. It is time to repeal that remnant of a less enlightened and much slower-paced era (p. 160).