Microsoft on Trial : Consumers not harmed by MS

Microsoft Corp.'s first witness in the antitrust case roundly criticised Department of Justice witnesses and attorneys, saying they provided no sound evidence that consumers are harmed by Microsoft's actions or that the company has monopoly power over the PC market.

Microsoft Corp.'s first witness in the antitrust case roundly criticised Department of Justice witnesses and attorneys, saying they provided no sound evidence that consumers are harmed by Microsoft's actions or that the company has monopoly power over the PC market.

In written testimony submitted to the court Monday, Richard L. Schmalensee, dean of MIT's Sloan School of Management, argued that:

  • Consumers have benefited from lower prices,

  • The Windows operating system is not a "choke point" for software distribution,

  • And integrating the browser into Windows is "procompetitive," not anticompetitive as the 12 DoJ witnesses have claimed.
"Proper economic inquiry into whether a company has engaged in anticompetitive conduct should end if it concludes that consumers have not been harmed by the conduct at issue and are not likely to be harmed in the future," Schmalensee wrote

The economist, who's been a consultant to both the DoJ and the Federal Trade Commission, said the software market favours a succession of "category leaders," who can be toppled at any time by innovative competitors. As examples, he cites Intuit Corp.'s Quicken and WordPerfect, which used to be the most popular word processing suite before Microsoft's Office took its place.

Schmalensee also argues against one of the central themes of the government's case: That Windows is a significant vehicle for software distribution. Netscape Communications Corp. -- which is at the centre of the DoJ case -- has argued that Microsoft eroded its market share by preventing Internet service providers (ISPs) and computer makers from actively promoting or including its browser on the Windows desktop. Others, such as America Online Inc., claimed that threats they would be excluded from the desktop forced them to strike deals with the software giant. But Schmalensee said the DoJ witnesses' claims are "patently false" and that software companies can find distributors in online content providers, ISPs and other software makers.

Schmalensee also called the government's claim that Microsoft is a monopolist "a red herring." "It is irrelevant to most of their allegations that Microsoft engaged in anticompetitive conduct," he wrote. In a summary, Schmalensee whittles his 324-page testimony down to nine findings drawn from his analysis of the software market:

  • Consumers have benefited from Microsoft's actions,

  • Microsoft doesn't have a monopoly over the PC software market,

  • Windows is not a choke point when it comes to software distribution,

  • Microsoft didn't prevent Netscape from distributing its browser,

  • Including Web functionality into the OS improves the platform and therefore is procompetitive,

  • Microsoft's Windows is successful in the marketplace because the company keeps improving it,

  • Netscape has not been hindered by Microsoft and has enough users to attract developers,

  • AOL's pending purchase of Netscape could threaten Microsoft's position,

  • Remedies proposed by the plaintiffs would hurt consumers and competition.
Microsoft is expected to begin telling its side of the story Wednesday, after the DoJ finishes with its final witness, MIT professor, Franklin M. Fisher.

Take me to the DoJ/Microsoft page.

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