Cato Institute: Microsoft probe is misguided

U.S. antitrust law, which aims to create a level playing field by reining in companies deploying unfair competitive tactics, never made much sense in the first place, and its use against Microsoft (MSFT) could threaten the viability of the software industry, argues Robert A. Levy, a senior fellow in Constitutional Studies at the Cato Institute and author of a new report on the software behemoth's antitrust woes.

"Our world of telecommunications and information technology has indeed brought about quantum changes in many fields; but new technology has neither extinguished nor revitalized the rationale for antitrust. That rationale was always illusory," Levy writes.

Software makers would actually become far less innovative "if government were to butcher the incentives that lead to new and improved products," creating the very situation antitrust policy purports to guard against, he writes.

Microsoft's tie-in of the browser with the computer operating system -- which will likely be the focus of much debate during Tuesday's planned appearance of Microsoft CEO Bill Gates before a Senate committee hearing on software industry competition -- "poses no greater threat to competition than the packaging of tires with automobiles or laces with shoes," Levy writes in the report.

"Although rivals whined that bundling MSN (Microsoft Network) software with Windows 95 would swamp competition, Microsoft's feared clout has not materialized" in the online service market, the report points out. "Whatever competitive advantage Microsoft may enjoy in the sale of operating systems, the company has been singularly ineffectual in leveraging that advantage. Customers refuse to buy a product they do not like."

The report goes on to speculate that the recent frenzy of interest in relaunching antitrust action against the company can be linked to its "aggressive" efforts to fight that action, which may have angered antitrust regulators.