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Created: 2000-04-26
Last Modified: 2000-5-04
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New Economy Forum Briefing

J. Bradford DeLong

May 2000


The New Economy and Antitrust I: Microsoft

  • Monday, Federal Judge Thomas Penfield Jackson has found as a matter of law that Microsoft has violated the 110-year-old Sherman Antitrust Act.
    • The judge's findings--of fact and now of law--have been very carefully crafted to severely diminish the potential for higher courts to overrule his findings.
    • The judge's findings of law are intimately tied to his findings of fact, and higher courts must pay enormous deference to his findings of fact.
    • Hence higher courts must either uphold the judge, or overturn long-established and hitherto-unchallenged antitrust precedent
  • Does this decision matter? Five years ago, Microsoft, with its dominance of desktop operating systems and productivity applications, was the heart of America's high-tech economy. But today the heart is the network--UUNet, Akamai, Oracle, AOL, Apache.
  • The Justice Department's theory is that Microsoft is trying to construct a web of dependencies between its products--Windows, Office and Outlook, Explorer, IIS,
    FrontPage, and others--so that each works much better with the other than it does with their competitors' products.
    • Most recent news: Microsoft's restricted Kerberos implementation.
  • The Justice Department had tried to fix this by saying that Microsoft could integrate but not bundle products.
    • Microsoft got around this in Windows 95 by moving dynamic link libraries, and then declaring that Windows and Explorer were not "bundled" but "integrated." The Appeals Court bought it.
    • Thus the Justice Department now faces a problem: conduct restrictions it imposes may well be undermined by the DC Circuit.
  • What to do?


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Professor of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax

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